Pay Now or Pay Later?

African American Businessman Using Credit Card And Laptop Shopping Online Sitting At Workplace In Modern Office. E-Commerce. Entrepreneur Making Payment Via Online Banking Service


With all the constant news about supply chain back ups and the possibility of your loved ones not receiving their holiday gifts on time, you probably started holiday shopping. Now, prior to the pandemic, almost 30 percent of holiday shoppers had to paid off their holiday shopping bills. Therefore, the question facing shoppers is, should I use my credit or debit card to purchase holiday gifts. Let’s take a look!

Option 1: Debit Card 

If you have a holiday shopping budget or need to control your spending, then using your debit card should be the payment method of choice. The benefit of using your debt card is that purchases register immediately with your bank account and therefore, you have your bank account balance in real time.  The likelihood of over spending is reduced because if you don’t have the money,  you don’t have it!

The negatives of using debit cards are many, but it may still be worth it. Legally, you are not provided the same protections when you use your debit card verses your credit card. If you lose your debit card, you have two days to report such activity. If reported within two days, your liability may be limited to fifty dollars. On the other hand if there was fraudulent use of your debit card but you report such activity after two days but within  sixty days to your bank,  your liability may be up to five hundred dollars. Reporting fraudulent debit card transactions beyond sixty days means that your liability would be unlimited. The reality is even if you fit into any of these protections, it will take time for your money to be returned.

Another negative with using debt cards is that they do not help you build credit. Using your debit card is like paying cash. With interest rates on credit cards averaging 16 percent, paying for holiday shopping may be your best option struggling with budget and management.

Option 2:Credit Card

As you shop this holiday season, credit cards provide the most legal protection and flexibility. In 1974 the Fair Credit Billing Act was passed which was designed to protect consumers from unfair credit billing practices. Those billing errors covered by the law include unauthorized charges, charges with an incorrect date or amount, and calculation errors. In the event your credit card was used fraudulently, the law limits your liability to fifty dollars. The law also allows you the option to not pay merchants if there is a billing problem or dispute over unsatisfactory merchandise until the complaint is resolved.

Further, credit cards offer extended warranty and purchase protections. They also provide more generous reward programs. But for all the benefits, if it’s going to take you several months or one year to pay off your debt, use your debit card.


Today’s what’s up is about defaults. While defaults on debt have a negative impact on your credit report, FICO has an updated model that weights paid debt in collection differently. With FICO 9, if you have any debts which were in collections but have been paid off, they will no longer damage your credit score. That’s what’s up!


Ruthven R. Phillip, Esq., is a tax attorney, Stewardship and Philanthropy Ministry Assistant, and CEO of Give2Getrich, LLC . Give2Get Rich, LLC 2021. All Rights Reserved. Any distribution or reproduction of part or all of the contents in any form is prohibited.


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