 TITLE: Do You Really Need a Credit Card? CONTENT: Debit Cards vs. Credit Cards\n----------------------------\nCredit and debit cards may seem the same—after all, both are plastic cards you can use to make purchases. However, there are some key differences between the two that you should understand.\n**_Credit cards_** are a form of borrowing called revolving credit. When you first receive a credit card, the issuer determines an amount up to which you can borrow (your credit line). Each time you use the credit card, the card issuer pays the merchant and then adds that amount to your card's balance (the amount you owe). When your monthly bill is due, you can choose to make the minimum payment, pay more than the minimum or pay your balance in full.\nA **_debit card_** is a way to make cash purchases without carrying actual cash. The card is linked to your checking account; when you use it, money from your bank account is transferred to the merchant's account. Payments occur in real time, so as soon as you make a purchase, your bank account goes down by that amount.\nFraudulent use of debit and credit cards is handled a bit differently too. If your credit card is lost or stolen and someone uses it to buy things, the charges are added to your balance, and you don't lose any money immediately. Report the fraud to the credit card issuer, and legally, the most you'll be liable for is $50. Many credit cards today have zero fraud liability.\nDebit card fraud can have a bigger impact on your finances for a couple of reasons. First, the money leaves your account immediately—which can put you in a bind if, say, the rent is due and your checking account has been cleaned out. Second, you have fewer protections against debit card fraud. Here's how it works:\n*   If you discover and report the fraud to the bank within two business days, the most you can be liable for is $50.\n*   If you report the fraud after two business days but within 60 days, you can be liable for up to $500.\n*   If you wait more than 60 days, however, you might not get any of your money back. In fact, if the criminal took money out of accounts linked to your checking account, such as your savings account, you may not get a refund for that either.\nEven if you notify the bank of the fraud within two days, you'll need to wait for the bank to investigate before reimbursing you. In some cases, you could wait up to two weeks to get your money back. Keep an eye out for debit card fraud by checking your bank account online regularly, looking for any suspicious or unusual transactions.\nGiven the differences between the two types of cards, when should you use each of them? Use a debit card if:\n*   **You're worried about debt.** For everyday purchases, like buying groceries, using a debit card can be a good way to keep your spending under control.\n*   **You're getting cash from an ATM.** You won't pay any fees if you use your debit card at an affiliated ATM. However, if you use a credit card to get cash, you'll likely have to pay a cash advance fee of 3% to 5% of the amount withdrawn. What's more, interest begins accruing on the cash advance immediately, which makes this a costly way to get cash.\nUse a credit card if:\n*   **You're trying to build credit.** Because debit cards are cash transactions, banks don't report them to credit reporting agencies. As a result, using a debit card doesn't help you build a credit history or improve your credit score.\n*   **You're shopping online.** Using a credit card to limit your liability for unauthorized charges can be a smart way to play it safe when shopping online.\n*   **You're traveling.** If you're on a trip and want access to more cash than you have in your checking account, use a credit card to enhance your purchasing power. If you have a card that earns rewards on travel purchases, all the better.\n*   **You're making a big purchase.** If you have issues with the item after you buy it, using a credit card enables you to dispute the charge and possibly get it removed. END