This 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!

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Banks offer a lot of services and features. You probably know most of the popular ones. Heck, you probably know most of the not so popular ones. However, I am pretty certain that there is at least one thing on the follow list that you didn’t know about before. And if I’m wrong, I invite you to look at these 7 Unwritten and Often Forgotten Credit Card Secrets, and hopefully between the two you’ll learn something new that will save you some money in these difficult times.

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Welcome to the second edition of the Foundation Series (learn more about the Foundation series), a series of posts that discusses the very basics of personal finance and hopes to set a “foundation” for a solid financial approach to life. This edition tackles a topic that so many of us are introduced to with little preparation, debit and credit cards.

Part of the reason why we don’t get a gentle introduction is because it’s not in the interests of credit card companies to educate its customers. They introduce cards when you’re most impressionable, like the first few days of college. They give you the terms and conditions in microprint and include dozens of pages, virtually assuring that you won’t read every word. They add in counterintuitive business practices, like universal default and double cycle billing, that appear to go against all conventional wisdom about borrowing. They do this not because they’re trying to screw you, they’re doing it because their responsibility is to the shareholders of their company and the almighty dollar. They’re not trying to bankrupt you, but many aren’t going to hold your hand and, let’s be honest, we’re all adults capable of making our own decisions.

I won’t hold your hand either (sorry! ) but here’s a brief guide that should prepare you more than a hundred pages of 4 pt. font claiming to be terms and conditions!

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There are plenty of reasons you should use a credit card instead of a debit card (if both are available) but here’s one that is especially compelling. A debit card is directly linked to your checking account, whereas a credit card is linked to an ephemeral credit limit. When Burger King accidentally bills you $2,243 instead of $22.43 or when they bill you $8,648 instead of $86.48, you aren’t suddenly emptied of all your funds.

Debit cards used to suffer from weaker fraud protection, that’s no longer the case. Debit cards used to be less widely accepted because they used a network that differed from credit cards, that’s less and less the case. However, debit cards will always be linked to your bank account (that’s by definition) so when someone accidentally enters in $2000 instead of $20, you’ll be out that money until someone is around to resolve it.

In the meanwhile, any checks you’ve written or any future debit transactions will result in NSF (not sufficient funds) and overdraft fees – which will likely put a smile on your bank’s face and a huge frown on yours.

So, if you want yet another reason not to use debit cards, this is a big one. Don’t underestimate the power of carelessness and stupidity.

They lack the same protections as credit cards, they allow access directly to your checking account, and many of them don’t have cashback or any other benefits to speak of. So, why do so many people use debit cards!? I was shocked to find this stat, “Debit cards have overtaken credit cards as Americans’ plastic of choice for in-store transactions—33 percent debit, compared with 19 percent credit,” in a scary article about debit card fraud. I can understand it if you use debit cards because you can’t get a credit card or you don’t trust yourself with a credit card, but outside of those two reasons why would anyone use debit?

Educate me!

Upon signing out of my account tonight, I was notified of an ongoing promotion Bank of America was running where they would send you a $10 Home Depot gift card if you used your Bank of America debit card at least ten times before September 30th.

Make 10 purchases with your Check Card between September 1 and 30. You can use it at places that don’t have a PIN pad—simply present your card.

Virtually everything you buy counts, no matter where you use your card

As a “thank you” from us, we’ll automatically send you a $10 Gift Card to The Home Depot®

Some caveats:

Offer not valid on a) ATM transactions; b) credits or other adjustments related to POS purchases, such as those for purchases that are cancelled or returned; c) purchases for cash-like items such as money orders, traveler’s cheques, foreign currency, cashier’s cheques, gaming chips, and other similar instruments and things of value; d) account funding transactions including transfers to open or fund deposit, escrow, or brokerage accounts and purchases of stored-value cards

Sounds like an easy way to make $10 from Bank of America for a card you probably carry in your wallet or purse anyway.

“Woah! What are you saying?” you must be saying to yourself. Do I really think that the $31 fee per overdraft charged by PNC Bank is a good thing? What about the advice I gave about asking for a fee or charge by waived by a banking institution? I don’t think it’s a good thing and I still do think you should ask to have fees nixed, but if you give me a chance to explain what the title means I promise it’ll be worth it.

If you read the story about “poor” Chris Keeley, you’ll learn something your parents tried to teach you when you were really young. I want to make the analogy of a horrible fee ($31/overdraft is excessive, so is allowing him to overdraft seven times) to a hot stove. When your mother says “Don’t touch that stove John/Jane, it’s hot and you’ll burn yourself,” you may or may not have listened. But if you touched it, you were burned, and you never touched the stove again. I think the same can be said for these ridiculous fees.

It’s been shown that Americans, in general, don’t save enough money, are up to their eyeballs in debt, and are generally financially irresponsible. I feel that these high fees and penalty charges is nature’s way of teaching you that you shouldn’t touch the hot stove and that you shouldn’t eat so many Big Macs.

Here are a few examples of what I mean:
Overdraft Charges: Listen… Keeley should have known how much was left in his account and he shouldn’t have used the debit card in the first place! Why not use a credit card and at least get a piddly 1% reward for it? You get no advantage from a debit card. But let’s extend Overdraft Charges to include Over-The-Limit Charges too. You should know roughly how much credit card debt is on each card – or you have too many cards or have overspent. It’s as simple as that.
High Finance Charges for Cash Advances: Every credit I know of charges you for taking out cash with your credit card. The answer? Don’t use your credit card for cash advances!
ATM Charges: Are you telling me you can’t plan far enough ahead to hit up an ATM with your bank’s name on it? If you have a major bank, you have ZERO excuses. If you have a smaller bank, you at least can lean on the fact that there are fewer ATMs but you still can probably plan your finances enough in advance to visit your ATMs!
Late Payment: Now, some banks are insidious and they change the date due each month. But for those of you without that excuse, how could you not pay your bill on time???

Of course, as I mentioned in the Late Payment example, some banks are evil cheats who are trying to scam you. When it comes to those banks, just cancel your card and get another one… let your business do the talking. I think people need to show some financial responsibility and instead of the media babying folks like Keeley, they should educate their readership and explain that he brought it upon himself. Quit using kid gloves on adults when it comes to finances and maybe they’ll grow up!

Agree? Disagree? Think I’m a lunatic? Let me know!