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Credit or Debit?

Find out the advantages of using each card

Q. When is it better to use a debit card versus a credit card?

A. Debit cards are fine for everyday purchases. Since the money comes instantly out of your bank account, you may be less inclined to overspend. And you can’t run up balances the way you can with a credit card.

See also: Sticky ATM keypad may mean trouble.

But credit cards are often a better choice for big-ticket and online purchases. You avoid instantly draining your bank account of large amounts, and you can get better protection if there’s a problem with the purchase.

For example, you can withhold payment or more easily dispute a charge. In addition, credit cards often offer better rewards than debit cards, and sometimes provide extended warranty protection and theft insurance for things you buy.

Credit cards are also a wiser choice for transactions in which the final bill is uncertain—hotels, for instance, where you might run up a room-service tab. When you present a debit card on check-in, the clerk is allowed to put a hold on your account for your room rate plus the hotel’s guess at your incidentals.

When the transaction finally clears—it could take up to two days after checkout—you’re debited only for what you actually spent, but in the meantime you’ve been at higher risk for bounced checks and overdrafts. Rental car agencies also put holds on your accounts, as do self-service gas stations—they put a hold on $50, even if you only buy $10 of gas.

Sid Kirchheimer writes about consumer and health issues. Have a question for Sid Kirchheimer about a new product, a new kind of bank account? Check out the Ask Sid archive. If you don’t find your answer there, send a query.

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