Why Would Someone Choose Credit Instead of Debit?

Some consumers avoid accumulating credit card debts by using debit cards to make cash withdrawals from their checking accounts for purchases. Yet credit card users who manage their accounts wisely extend their cash flow. Credit card issuers also offer their customers better protection from fraudulent transactions than debit cards provide.

Grace Periods

Some people use credit cards to use grace periods to their advantage. Grace periods are the number of days cardholders have to pay their bills in full before interest charges are added to their purchases. Therefore, people who pay off their credit card bills each month before the grace period ends can avoid paying interest charges. Credit card users also have more flexibility with their cash flow because they can buy something they need now and pay for it at a later date. Debit card purchases are usually deducted from cardholders' checking accounts almost immediately after a purchase is made .

Debit Blocking

Credit card users may want to avoid having their cash tied up through blocking.

Car rental companies and hotels that accept debit cards block off or hold extra money in cardholders' checking accounts to ensure they have enough cash to pay the final bill. The blocked amount is higher than the stated car rental or room price, and it's temporarily unavailable for the debit cardholder's use. That causes problems for cardholders who don't have access to cash they need until the blocked funds are released.

Fraud Issues

Some consumers use credit cards because they provide better fraud protection than debit cards. Credit cardholders who find fraudulent charges on their bills report the problem to their card issuers for an investigation. The cardholder also has the right to withhold payment for fraudulent charges. Cash stolen from a debit card checking account is investigated by the cardholder's bank. The cash may be replaced by the bank, but the cardholder has to do without money he may need to pay bills until the bank's investigation is finished.

Cardholder Liability

Under the U.S. Fair Credit Billing Act, credit cardholders are only required to pay up to $50 for unauthorized charges on their accounts. Debit cards don't offer the same kind of protection. Debit cardholders have to report unauthorized withdrawals from their accounts within two days of discovering them to get the same $50 protection limit. Debit card users who don't report unauthorized charges within 60 days could lose $500 or more because of the delay.