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8 Reasons Credit Cards Beat Debit Cards

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Debit Card hologramThis may be sacrilegious to say, as a personal finance blogger, but I’ve never been a fan of debit cards.

I’m biased though. I think I prefer credit over debit because because I’ve never been in credit card debt. I’ve never been on the business end of the tactics used by the credit card industry. I credit to a fear that my mom would be angry with me, rather than my own self-restraint, but either way I have never paid a penny of interest to a credit card company. :)

That being said, here are eight reasons why I think that credit cards are better than debit cards, which I hope you’ll enjoy arguing with me in the comments!

Reasons Credit > Debit

  1. Fat Finger Miskeys: Since a debit transaction immediately reduces your account balance, a cashier mis-keying in your purchase can have a devastating effect on your finances. It’s not unheard of for a cashier to key in $495.00 instead of $4.95 when they’re under pressure, tired, or stressed. When that happens, it can take days to unravel and by then you could have checks bouncing, your cashflow gone, etc. On credit, it’s not a big deal to reverse a charge temporarily.
  2. Blocking: When you fuel up at a gas station with a debit card, the station will put a block of $50 on your card, even if you put in $5. It’s because they don’t know how much gas you’ll be buying so they have to lock up the maximum amount. This block isn’t released until the gas station batch processes its pump transactions, which MSN says could be several days (see #4).
  3. Renting a car on debit can cause headaches: Renting a car with a debit card can be a huge hassle and the same blocking issue happens, except on a much larger scale. Instead of $50, think $500 and the release is often a week after you return the car.
  4. Overdrafting is still possible (and expensive): A big argument for debit is that it helps you manage your spending, you can’t spend more than you earn right? Well many debit cards now let you spend more than you have in the account and hit you with an overdraft fee.
  5. Slightly weaker fraud protections: Credit cards offer very good fraud protections whereas debit cards offer a slightly weaker set of protections. For example, you are only liable for $50 of credit card fraud if you discover the loss/theft of a card after the fraud occurs. With a debit card, if the loss of the card is reported within 2 business days, it’s only $50. After 2 business days, it’s $500. After 60, you are completely liable. You can read more about how they different on my foundation post about Credit and Debit cards.
  6. Most debit cards don’t offer rewards: Some debit cards do offer rewards but the vast majority don’t, since debit card transactions are usually very cheap (think a flat fee of 15 cents). With the fees so low, there’s no room for rewards.
  7. You don’t build credit: This is a pretty obvious negative about debit cards and might not be something you care about if you swear off credit as a whole (though there are several ways a bad credit score can hurt you outside of borrowing money).
  8. Warranty benefits: When you purchase something on a credit card, the credit card company often gives you a warranty benefit that doubles the existing manufacturer’s warranty up to a year. Debit cards don’t usually offer this.

However, one thing can’t be contested, it’s very very difficult to get into credit card debt when you only use debit cards and cash. I can’t dispute that. :)

Let’s discuss this, shall we? What do you think? Did I miss a reason? Is there a bigger reason why Debit > Credit? Let me know!

(Photo: neilt)

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52 Responses to “8 Reasons Credit Cards Beat Debit Cards”

  1. Kimberly says:

    I prefer to use debit cards for day to day purchases and to save the credit cards for online purchases and big ticket items.

  2. Amanda says:

    I think for me the points are the main reason credit cards beat debit cards. Those points have paid for lots of airplane flights. To me that’s making money off of your credit card because I have business expenses I have to make so why not make them with my credit card.

  3. emma says:

    1) You can run your debit card as credit at gas stations, so no $50 block.

    2) You generally approve the amount the store is charging, so if 4.95 rings up as 495.00, you will be given a chance to catch it before approval.

    3) I totally agree that renting a car on a debit card is a royal pain! I can do it, I do it often, but 50% of the time I have some hassle associated with it. Like: the company SAYS they take debit, but the individual branch or the guy behind the counter says they don’t, and 40 minutes of arguments ensue. Or: They put a $300 hold on the account that takes up to 2 weeks to clear. Etc. Huge pain.

  4. Neil says:

    Agreed. Interest free loans and rewards, too. Can’t go wrong.

  5. Victoria says:

    Okay, so I found this article by chance while I was researching “How to Manage personal finances without a debit card.”

    I graduated college in ’06 and from the time I was a freshman, our bank gave every student a debit card with our college’s logo on the front.

    Since then, this is the ONLY way I have ever known to really manage my money.

    However, I am finding that my spending is beginning to get out of control, and I think that its hard to track because of the debit card.

    So, that said. Can you PLEASE do an article on how to manage your money withOUT a debit card? I can’t find anything on the net…

  6. Jamie says:

    I’ve worked in the banking industry for years, and I can tell you that even if an item isn’t paid, you will still be charged a fee just for trying to overdraw your checking account. I’ve seen it countless times where I work now: a customer tries to use their debit card, the item is returned because of NSF, but the account is still charged a $25 fee just for trying. oftentimes, the next day the merchant will try to pull it again, resulting in yet another fee. you also need to pay whatever fee the merchant charges when items come back unpaid. even if you do carry a balance on your credit card, the interest you pay each month probably wouldn’t add up to what you could be paying in fees at your bank. i use my discover card for everything and i have earned hundreds of dollars in rewards, whereas i’ve only paid a few dollars in interest on those months when money was tight and i couldn’t pay off the balance in full as i normally do. So it’s there when I need to carry a balance, but if I don’t, i don’t pay anything extra. Credit cards all the way!

    • Sadie says:

      “Discover Card” is definitely the way to go to build up CashBack Bonus money. Truly pays off when one accesses Online Shopping via ShopDiscover for additional 5% to 20% Cashback Bonus.

      Take advantage of the “quarterly” 5% Rewards Program..you must sign up for these.
      Note: Earn 5% on purchases for Travel (Jan thru Mar) & 5% on purchases for Grocery & Drug Stores for March 2010.

      I especially like being able to use some of the Bonus money for Gift Cards, restaurants, etc. In fact, just bought new PC using these bucks!

      While Mileage Cards are available, I have never used these.

  7. Bob says:

    The man who advocates credit cards over a debt card is a fool, or the thought to be extinct financially well disciplined individual.

    The biggest reason NOT to use a credit card is the INTEREST TRAP! Get a rewards or interest EARNING debit card and if you use credit card(s) always pay them off at month’s end or don’t use them!
    Credit in any situation is a bank’s trap – banks want you to screw up, they know most people will, they “bank” on it.
    It’s a simple philosophy that keeps you out of debt and away from being subjugated to the banks – don’t buy stuff you don’t have money to pay for! (stupid)

  8. Samean says:

    All points are well pointed out. I only recommend using a credit if you can payoff the amounts in full each month instead of the minimum. I’ve earned a high credit rating and beating credit issuers this way. Never use debit for rentals. Your credit card is built on yo protect you for rentals so you can decline the collision waiver.

  9. CjoyB says:

    About #4 Overdrafting is still possible (and expensive): This might happen with debit cards. But Atleast the bank should tell you that They are going to let you barrow some money after the money in the debit card is over. If they do, YOu can go to your bank and discuse if you want this to be allowed or not. IF they don´t tell you and actually happens one day, you could demand the bank.


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