Credit or Debit: Which Should I Use?

I've always thought it was more financially responsible to use my debit card for purchases because it deducts the money straight from my checking account. Is this true—or should I be using my credit card more? - Danielle, Charlotte, N.C.

Carmen Wong Ulrich

Carmen Wong Ulrich

Carmen Wong Ulrich is a personal finance expert and a regular Today show contributorCarmen Wong Ulrich is a personal finance expert,... Read more

Would you believe that I haven't had a debit card since 1998? That was when I discovered that someone was taking $60 out of my checking account every two weeks, masking it as a debit transaction. If your information gets into the wrong hands, debit cards can be dangerous.

But what about limited liability? A nice guy once came onto my show to talk about his $2,000 T-shirt—a sparkly orange number he bought for his wife while in Jamaica that was actually only $35 U.S. dollars ($2,000 Jamaican). The cashier put the transaction through as U.S. dollars—on his debit card. Guess what? His bank sided with Jamaica and he ended up paying $2,000 U.S. dollars for it. After all, he had signed the receipt, right? Oy!

Using a credit card without carrying a balance gives you two very good things: Purchase protection and a discount. Where's the discount? You can take it either with cash-back rewards or points. Remember, credit cards themselves are not bad—they are tools, financial tools to use with strategy, knowledge and responsibility.

If you just can't control your spending with a credit card, promise me to at least use a credit card to pay for big items like travel, electronics and any and every purchase you make online. The protection you get from using a credit card is well worth the occasional swipe. And if you're wedded to your debit card but are also one of the almost 20 percent of Americans who overdraw their accounts at least once a year (making banks billions), at least opt out of overdraft protection.

Got a question for Carmen? Visit her expert page to ask her advice!

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