But if you pay for something with your credit card and aren't happy with the purchase, your card issuer can legally withhold payment from the retailer until they resolve the dispute, and you won't be charged. Let's say you've decided you want a credit card, which one should you get? The answer depends largely on whether you plan to pay off the balance each month. If you know you'll probably carry a balance, look for a plain-vanilla card with no annual fee and the lowest annual interest rate available. (Any interest you pay on a carry-over balance will offset any perks you could get through a rewards card. ) You can compare several low-interest credit cards at and, which both provide updated information on dozens of different cards. You can also apply online for cards through either site, but limit your applications to one or two to avoid hurting your credit. Be aware that card issuers can raise your interest rate after you've gotten the card. So check your monthly statements. (You should be aware, though, that the Federal Reserve has just passed rules that will take effect in mid-2010 limiting the card issuers' ability to raise your rate, unless you're late with a payment. )
You may also be charged for making late payments. There are no interest charges. But you may be charged fees for withdrawing more than what's in your account. Perks Many cards offer rewards such as frequent flyer miles, cash back or gift cards. You can often get cash back at points of sale. Credit score On-time payments could bolster your credit score. Doesn't affect your credit history. So use won't help – or hurt – your credit score. Fraud protection Since funds aren't withdrawn immediately, you may be protected from fraud or theft. If you misplace your card, you may be able to temporarily lock it via mobile or online banking. You may be asked to enter a Personal Identification Number (PIN) to authorize purchases. If you misplace your card, you may also be able to temporarily lock it via mobile or online banking. Liability if lost or stolen Most cards have $0 liability protection for fraudulent purchases. You may report the theft/loss in a timely manner to dispute fraudulent charges.
Avoid increasing your debt. Using a debit card instead of a credit card is a good way to decrease your chances of getting into debt. This payment method should keep you within your budget and from spending all of the money in your checking account. If you ever do spend more than your checking account allows, you may be charged an Overdraft or Return Fee from your bank. Debit cards give you easy access to your cash. You can use your debit card to withdraw cash from ATM machines. Some retail stores will also allow you to get "cash back, " charging more than your initial transaction to your checking account and giving the cash to you with your receipt. Pay now to avoid a bill later. Since the money from a purchase you make with your debit card is taken directly out of your checking account, you don't have to worry about a bill coming your way at the end of the month. This also means that you don't have to worry about interest accumulating on that bill. Using a debit card is a great way to control your spending, just be careful to avoid Overdraft and Return Fees!