There has been an increased awareness of the credit card versus debit card debate in recent months. This is not surprising as more consumers are making a conscious effort to spend less money and reduce debt. The credit card industry has been offering rewards programs for many years and in some cases these programs are very lucrative for individuals who manage their credit responsibly. As concerns increase over changes in the credit card industry more people are finding that credit card rewards programs may not be as beneficial as they were in recent years.
With the number of debit card transactions on the rise, issuers of debit cards are implementing rewards programs to further entice consumers to use their debit cards for every transaction. While it may be tempting for people who use credit cards solely for rewards to drop their current program and switch to a rewards program through their debit card, consumers are urged to proceed with caution. Changes in the industry have lead to speculation that credit card rewards programs may become less "rewarding" however they still remain more beneficial than most current debit card programs. Here are a few things to consider before switching to a debit card rewards program.
- Credit cards remain the safer alternative- There are many benefits to using a debit card for day-to-day purchases however credit cards remain the safer option. Credit cards simply offer more protection against theft or fraudulent use than debit cards. If you are opting to not carry cash and use plastic as your main method of paying for purchases, it is important to know what type of protection is offered by each card in the event that card is lost or stolen.
- Debit card rewards programs require patience and money- One of the reasons credit card rewards programs are popular among not only card holders but also card issuers is the money made off of these programs. The bank issuing the credit card makes money as well as the card holder who also benefits in the form of cash, airline and other rewards. Debit card use does not generate as much money as credit card use, therefore you must spend considerably more before you begin to see the rewards you seek. In some cases you might have to actually spend twice as much money with your debit card to see the same rewards as you would with your credit card.
- Understand the terms- As with all other financial agreements it is important to fully understand the terms and conditions of each rewards program. There are often annual fees associated with both debit and credit card rewards programs. You should also understand how you will earn your rewards, how they are paid (monthly, annually) and if your rewards expire. Without understanding these issues you may find yourself using a rewards program that really doesn't offer you many rewards after all.
The best way to determine which rewards program will work for you is by closely examining your current and potential spending habits. If you pay your credit card balance in full each month you will more than likely continue to gain more benefits by sticking with your current program. On the other hand if you either do not pay your balance or do not use credit cards frequently your best bet might be sticking with the less lucrative yet more realistic rewards you will gain by using your debit card.