Making the choice between using your credit card or your debit card is often a matter of looking at how much money you have in your checking account – or deciding whether the purchase you’re about to make comes into your monthly budget.

But other factors should be considered as well.

For one thing, credit cards have more protection under the law. When you use a debit card, merchant mistakes and fraudulent or double billings are sometimes impossible to resolve. They already have your money, just as if you’d written a check, and you’ll have to convince them to give it back. With a credit card, you can have the charge reversed and “charged back” to the merchant as long as you can show the card issuer good cause.

Treatment of theft is also different. Under the Electronic funds Transfer Act you’re responsible only for the first $50 if your debit or credit card is stolen. But with a debit card, you must report the loss or theft within 2 business days. With a credit card there is no such time limit. Additionally, some credit card issuers offer a zero liability in case of theft. Check your account details.

Avoid using a debit card for car rentals… Some companies will automatically check your credit each time you use a debit card to rent a car – putting credit score damaging inquiries on your credit report.

Holding a reservation with your debit card can present another danger. Each time you use a card – debit or credit – to “hold” a reservation, the car rental agency or hotel puts a similar “hold” on your bank account or your credit card account in the amount they believe you will eventually owe. This practice effectively reduces the dollars available to you, even though they have not yet come out of your account.

This could be embarrassing – you might find checks bouncing because you didn’t know you had already effectively “paid” that hotel you plan to visit next month. In the case of a credit card, it could be credit-score-damaging because it drives up your debt to available credit, not to mention that you might inadvertently make a charge that puts you over limit.

The best card to use to hold a reservation is a credit card with a limit well over the cost of your intended hotel stay – and that you don’t use for anything else.

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