Paying with cash, debit or credit - which is best?
True or false: If it’s available, paying with cash is always better than purchasing with credit cards.
Answer: False. Sometimes, credit cards can be a better option than paying with cash. When deciding how to pay for purchases, consider how safe it is to carry cash in certain situations, your individual spending habits, and how organized you are about tracking your finances.
Here are several tips to help you manage your purchase decisions:
When cash should be king: Some people find they don’t overspend if they use cash to make everyday purchases. They tuck a budgeted amount into an envelope for each category of expense, and they stop spending when they run out. This approach doesn’t work for everyone. Some people are easily tempted to spend cash in their wallet or don’t feel comfortable carrying cash that may get stolen. There are alternatives to paying by cash or credit.
When to pay by debit card: Debit cards often look like credit cards but work differently. Debit cards allow you to pay for purchases conveniently, as with a credit card, but they draw money directly from your checking account. This way, you pay as you go. However, you need to keep track of your checking account activity, so you don’t overdraw it and rack up overdraft fees. You may also want to sign up for Alerts and Overdraft Protection Service.
If you are a Bank of America® customer, you can take advantage of an automatic way to save when you spend, using your debit card. With the Keep the Change® 1 Savings program, each time you make a debit card purchase, Keep the Change® deposits the difference between the amount you paid and the nearest dollar amount in your savings account. It’s a great way to save automatically.
When to charge it: Credit cards can be a safe way to pay for purchases – and help you build your credit rating – if you pay your full balance each month and avoid interest fees. Caveat: If you can’t pay your full balance each month, you will be paying interest fees. For those who use credit cards wisely, many card issuers offer rewards programs for your purchases, such as those that give you points you can put toward plane flights and merchandise. If you are a Bank of America customer, there are many rewards programs you can take advantage of.
When debit or credit cards can help you earn cash back: Many debit cards and credit cards are connected to cash-back programs. For example, if you are a Bank of America customer, you can enroll in the Add It Up® program. The Add It Up® program lets you to earn up to 20% cash back on online purchases at participating major retailers.2
A word about security: Many people worry about what will happen if their debit or credit cards are lost or stolen. Be sure that the debit or credit card you use offers fraud liability protection. If you are a Bank of America customer, you will get our $0 Liability Guarantee for your consumer debit and credit cards, meaning you are not responsible for fraudulent charges when you report them promptly.3 To further protect yourself from fraudulent use of your debit and credit card, ask if your bank has a program to put your photo ID on your cards, so merchants will know if someone other than you is using it. If you are a Bank of America customer, you can get the Photo ID Security® feature, available on most cards that the bank offers. You can stop by a Bank of America banking center to have your photo taken or mail in a photo using the form on the Bank of America web site.
Take action now: Decide how you will pay for each category of purchase in your budget ahead of time. It will be easier to track your spending if you make payments in a consistent way. If, say, you always pay with debit or credit for your groceries, you can easily monitor your weekly spending using online banking.
What's next? Things you may not know about credit cards
1 Keep the Change® patent pending.
2 Participating retailers and offers are subject to change. You must have either a Bank of America debit card or consumer credit card and be enrolled in Online Banking to be eligible for participation in the program. Redemption of accrued cash back rebates occurs in accordance with program Terms and Conditions, generally monthly when a minimum of $5.00 cash back has been earned. Program is not available to select military bank customers. Select MyExpression® credit cards, co-brand debit cards, Business credit cards and other accounts are not eligible for participation in the program. Additional restrictions apply. For complete program Terms and Conditions, visit www.bankofamerica.com/additup.
3 The $0 Liability Guarantee covers fraudulent purchases and payments made by others using your Bank of America credit and debit cards. To be covered, report purchases made by others promptly, and don’t share personal or account information with anyone. Access to funds next business day in most cases, pending resolution of claim. Consult customer and account agreements for full details.
Some accounts and services, and the fees that apply to them, vary from state to state. Please review the information for your state in the Personal Schedule of Fees (at www.bankofamerica.com/feesataglance or at your local Banking Center) and in the Online Banking Service Agreement at www.bankofamerica.com/serviceagreement.