Check Card vs. Credit Cards: What to use this holiday season

by Kathryn Tuggle

Whether you’re luxury shopping on Fifth Avenue or browsing bargains at Target, it’s important to know which card you should reach for at the register.

While credit cards may offer more security and better rewards, check cards can ensure you don’t overspend.

We asked the experts to break down the best options for your budget and lifestyle.

READ: Should you ever use a coupon on the first date? 

First things first: Is there always a “right” or “wrong” choice?

“Choosing which type of card to use for holiday shopping depends entirely on your personal financial goals,” says Todd Albery, CEO of credit monitoring site Quizzle.com. “If building credit is the goal, and you’re a careful spender and pay your bills on time, then utilizing your credit cards during the holiday shopping season is a great way to build credit.”

If you can control your spending during the holidays, then credit cards may serve your needs best, adds Ken Lin, CEO of CreditKarma.com.

“Most credit cards offer some type of rewards program, and some will come with purchase warrantees and insurance against lost and theft,” Lin says.

However, if curbing your impulse-buying is a challenge, using a debit card limits your ability to overspend and forces you to watch your bank account.

“If frugality and saving is your goal, putting the credit cards away until the New Year may be a good idea,” Albery says.

Which one is more secure? My credit card or my check card?

“Without a doubt, credit cards are the safest way to pay for holiday purchases, at least when it comes to fraud or theft,” says Gerri Detweiler, Credit.com’s personal finance expert.

“All cards carrying the American Express, MasterCard or Visa logos are protected by zero liability programs that generally waive liability for fraudulent purchases if cardholders report the loss or theft right away, says Detweiler. “But with a debit card, the thief can wipe out your account and you may be trying to pay essential bills while you wait for a credit to reimburse your funds.”

READ: Is it worth it? Identity theft protection

If you use a debit card and are given the option of selecting "Credit or Debit" you should always select "credit,” says Albery. It will protect you from fees and keep merchants from placing a temporary hold on your account which may be considerably more than your actual charge.

Fraud is also harder to detect and deter with your debit card, Albery adds.

“Like credit cards, your limit of liability is $50 but you must contact your bank and report the fraud within two business days of the charge. If not, your limit of liability rises to $500,” he says.

Shoppers should think twice about how often they actually check their accounts looking for such charges, Albery cautions.

“Remember, most are typically small and repetitive for a reason,” he says. “You'll usually see four or five small (under $50 and sometimes less than $5) fraudulent charges. Today's online thieves are smart. They crash and dash your account, and disappear before you even notice the bogus transactions.”

READ: Crisis Button: I lost my wallet, now what should I do?

But what about my spending habits? I can’t always tell how much I’m spending with a credit card.

“It’s easy to overspend with credit cards, especially if you spread out your purchases among different cards,” says Detweiler. “So your best bet may be to stick to one or two cards; one reward card and one low-rate card for example. If you're heavily using a card to max out rewards, pay the bill as quickly as you can to minimize the chance that a high balance-to-available-credit ratio will hurt your scores.”

If you are disciplined and can pay your balance in full, there are great credit card rewards programs available, Detweiler adds.

Which type of card is better for big purchases?

“It depends on what financial and credit goals someone has,” Albery says. “Many credit cards earn points on purchases and give you more time to pay off larger items, but it’s not always good to buy what you can’t afford.”

Paying cash or using a debit card ensures your big purchases are paid up and you can enjoy them without the worry of paying off accrued interest — or harming your credit with higher balances on your credit cards, he says.

On the other hand, with a credit card, you can dispute the charge if the item is faulty or you were accidentally charged too much.

“If you purchase a pricey electronic item you can dispute the charge if there’s a problem with the item,” says Lin.

Which one will save you the most money/earn you the most perks?

“This will depend on how diligent you are about paying your credit cards off and on time,” says Lin. “If you don’t you will be hit with late fees and interest charges which could add up quickly and negate any of the rewards you received.”

READ: Creative strategies to curb credit card spending

With that said, credit cards—not check cards—generally offer cash back rewards, airline miles, discounts on gas and many other perks, Albery says.

“However, people should be on the lookout for the credit hangover after the holidays. Spending adds up fast and if you can’t pay it all off at once you will be looking at more fees and interest payments when the bills come due.”

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Best credit cards for the holiday season

If you’re considering opening a new card, Odysseas Papadimitriou, CEO and Founder of Evolution Finance and CardHub.com, says that the best credit cards for holiday shopping in 2012 can save you hundreds of dollars.

  • With the Chase Sapphire Preferred Card, you'll get a $400 statement credit if you spend at least $3,000 during the first three months
  • The Citi Diamond Preferred card offers 0% interest on new transactions for the first 18 months. 
  • The Slate card from Chase offers a “free balance transfer credit card” that offers an additional 0% interest on transferred debt for the first 15 months and doesn't charge any fees. 

“The Slate Card in particular is interesting because it could save the average household, which has roughly $6,700 in credit card debt, up to $1,000 in interest and fees, while helping them pay off what they owe much sooner than they would otherwise,” says Papadimitriou.

  • Store cards like the J.C. Penny card can save you up to 20% off apparel, shoes, handbags and fashion jewelry as well as 10% off fine jewelry, watches and home merchandise.

“You can't forget about store cards, which may offer some significant discounts at the stores to which they're tied,” he adds.