Back in the old days, buying things was fairly straightforward: cash or check. As technology advanced, we created credit cards, and now we can place our phone near a point of sale system and we’re set. We can even anonymously purchase goods with crypto currencies such as Bitcoin.
With all of these payment options, most people still stick with cash, credit cards, and debit cards. But which method is best? And what does it even mean to be best?
Cash is the tried and true payment method. It’s also the safest and least safe method available. On one hand, it is safe because you cannot spend cash that you do not have. So if you are terrible at budgeting, cash is king, cut up your credit cards, and you can stop reading now.
It is also the least safe method. Why? If somebody steals your wallet, well bye bye money. You will never get it back.
Debit cards are extremely popular. When you pay for goods with a debit card, you use money in your checking account. This is also good because it’s tough to pay for something if you don’t have enough money in your account. You can always have overdraft protection just in case, but fewer people are doing this.
What’s even better is if somebody steals your card, you usually aren’t liable for more than $50 worth of fraudulent spending. Unfortunately, most banks take their sweet time to reverse these charges. It often takes a police report, and at least 7-14 business days. If you’re lucky.
This is because when somebody steals your debit card and uses it, they have stolen your money, not the bank’s. Why should they work hard to reverse charges when they haven’t even lost money? It simply isn’t in the bank’s best interest to waste resources when they won’t get anything out of it.
Credit Cards are King
Credit cards are king, and there really isn’t much more to say. When you pay for goods with a credit card, it deducts the value of the purchase from your “available credit.” As long as you spend less than your available credit (typically many thousands of dollars), and pay off your bill in full each month, you’re set.
If somebody were to steal your credit card and make fraudulent purchases, they’ve stolen your credit card company’s money, not yours. Let me tell you, they don’t mess around with this stuff. If you report a fraudulent purchase, your credit card company will usually reverse the charges the same day, close the account, and overnight you a new card.
Seriously, they don’t mess around. Plus they usually include an additional set of features including:
- Price protection: if you buy something and the price goes down in < 90 days, you get the difference
- Return protection: if a merchant won’t accept your return, your credit card company usually will
- Extends warranties: usually extends the warranties on tech products by at least 1 year
- Loss protection: if you break or lose a product in < 90 days, you get a refund
I’ve used all of these benefits significantly. I recently signed up for a Spartan race but injured my knee before the event. They wouldn’t refund the $150 price, so I called Visa and had the money in my account within 5 minutes.
As a teenager, I went to Warped Tour. At one of the crazy shows, I was kicked in the face by a crowd surfer. My glasses went flying into the middle of a Mosh and were pretty much destroyed. I called American Express and had the cost of my glasses — $350 — refunded within a few days.
But I haven’t even mentioned the best benefit: the rewards. Any credit card worth its salt comes with some type of cashback rewards. My favorite credit card is the Fidelity Visa. It gives me 2% cashback, deposited directly into my Roth IRA. This forces me to invest in my future.
If you want to really maximize your credit card rewards, check out my post on Zero Day Finance, How I Got 42% Cashback with DiscoverIt. Although getting 42% cashback is rare, you can very easily get 15% cashback on all of your Walmart purchases (which includes gift cards that you can spend anywhere).
This combination of rewards and security means you should never, ever use your debit card unless you have to. If your debit card is stolen, your money is gone and it can take weeks to get back. If your credit card is compromised, they’ll just refund the charges, deactivate the card, and overnight you a brand new one.
But there is one more feature about credit cards that is extremely useful for the Zero Day Challenge: text alerts.
When you first start tracking your spending in the Zero Day Challenge, it can be tough to stay on top of things. But most credit cards will text you when a purchase is made. This means tracking your spending is as easy as reading your text messages. I definitely recommend it to everyone who takes part in the Zero Day Challenge.