When is a Credit Card Required?
You may ask, “Is a credit card required for purchases, or can I just use my debit card?”
Hotels and car-rental companies used to be credit-card-required businesses. Nowadays, they do allow customers to reserve rooms or cars with a debit card. When you sign your room or car contract, however, the company will put a hold on your debit-card bank account for hundreds of dollars more than your actual room or car-rental fee. This means that you are locked out of using that money from your bank account until you settle your bill.
While these hotel and car-rental companies will put a similar lock on your credit card, it is generally less worrisome (unless you’re right up against your credit limit) because they are placing a lock against your available credit and not against your actual money.
Also, please note that you might not be able to use a prepaid card to make a car reservation or hotel reservation.
Online shopping is another place where many people feel that a credit-card-required policy is the safest way to go. This is because they feel that by using debit cards online, they might end up giving identity thieves and hackers direct access to their bank accounts.
Here are some other benefits of using a credit card rather than cash or a debit card:
- You can keep your money in an interest-accruing savings account for the entire month, and draw interest until you withdraw the money to pay your credit card bill. If you use a debit card, the money is immediately deducted from your account.
- If you pay your bill in full every month and have a reasonable credit limit, you don’t need to be as vigilant about going over your credit limit. When you make all of your purchases with a debit card, you need to constantly be aware of the balance in your account in order to protect yourself from becoming overdrawn and accruing overdraft fees.
- Credit cards are required for building credit. Debit cards do not get reported to the credit bureaus.
- Finally, you can usually earn better rewards if you use a credit card.
A lot of people prefer a debit card over a credit card because they do not have to worry about paying their bill on time. With most credit card companies you can sign up to have either the minimum monthly payment or the full balance automatically deducted from your checking account. This way you will not have to worry about paying your credit card bill.
Based on these benefits, we recommend that you use a credit card so long as you use it responsibly, but we do NOT recommend that you use a credit card if you are going to end up overspending, going into unnecessary debt, or paying your bills late.
Is a credit card required? Not necessarily. Are credit cards more helpful than debit cards? Yes, so long as they are used responsibly.
Source: Card Hub Education
