How To Decide Whether To Use Debit Or Credit
Mankind is plagued by several quandaries: Paper or plastic? Ketchup or mustard? Betty or Veronica?
While the answers to these questions may be easy: Plastic, mustard and Veronica, the decision of whether to use credit or debit is not. One method spurs ludicrous overdraft fees, the other ignites ridiculous interest charges. One keeps you honest by forcing you to spend money you have, while the other is more liberating because it lets you spend money you don't have.
USA Today tackles the debate and understandably doesn't find resolution. But it does comprehensively break down the pros and cons of each method and may help you decide which route is best for you.
The story asks you to consider the none of the above:
Brian Riley, research director for the TowerGroup, says consumers should pick the card that's the best fit for their specific needs: convenience, low interest, fraud protection, rewards or even as a help in taming your inner spendthrift.
First step, though: Consider cash for the purchase. Cash is the simplest transaction and comes with no strings, fees or delayed costs.
Ah, so it was a trick question then.
But cash is hardly realistic in today's society. Who wants to carry change? It's just something I can't believe in.
I'm a credit card man. As long as you keep tight control on your spending and pay off the balance every month, you can't go wrong with magic plastic insta-debt. In addition, because of the way our laws are structured, credit cards give you bit more protection against fraud.
For example:
The Fair Credit Billing Act protects you from suffering damages due to unauthorized use of your credit card. If you report a lost or stolen card before anyone uses it, you are not responsible for any charges. If you do not report it before an unauthorized use you are liable for a maximum of $50.
Debit cards and ATM cards are covered under the Electronic Fund Transfer Act, and your liability depends on how quickly you report the loss. Unlike credit cards, debit and ATM cards can have unlimited liability in certain circumstances.
Debit or credit? Let how you spend decide [USA Today]
(Photo: The Consumerist)
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Comments:
It's never a good idea to use a debit card. Ever. That's actually money coming right out of your checking account, so if something goes wrong, you are effed.
ALWAYS use a credit card for every purchase, unless impossible to do so. Then you get to have the CC company on your side in case of dispute, you can easily reverse a charge on a bad vendor, and money doesn't magically get sucked out of your checking account.
NEVER, NEVER, NEVER use your debit card. Did I mention never?
Betty. Or Veronica. You know what, wouldn't bother me either way. Flip a coin. I'll live with the result ;)
Who is Betty and Veronica? Are they Phil's former flames or something??
I use my credit card as a pseudo-debit card. Basically I just pay off the balance once a week.
I use my debit card for just about everything now, except if it's a major giant purchase that I'm going to pay off with cash the next day. I fell into deep credit card debts just after college, climbed out of it and I'm determined to not fall into it again.
One question I have:
I have a Visa Check Card, like many people. Now, I know that if you use your credit card, you'll often get a warranty match and other perks from the credit card company, on the purchase. I'm wondering -- is it Visa or MasterCard that provides that warranty extension (etc) or is it the lender (ie, the bank that your card is through).
Because the only reason I use CC's for big purchases is JUST in case the product dies on day 366 of ownership, and the year warranty is out.
See my post above.
While other benefits, like extended warranties and cash back bonuses, etc. are good reasons to use credit cards too, ultimately the 800-pound gorilla in the room is the one about when something goes wrong.
When something goes wrong with credit cards, the worst that can ever happen - EVER - is you're out $50. If something goes wrong with your debit card, you could just simply be wiped out with no recourse. As in, every penny you had - *poof* - gone.
...which is why no one should ever use a debit card.
@YouDidWhatNow?: See I disagree. If I am making a purchase and the amount is too low for me to really even care about even if something does get screwed up ($15 or less), I don't mind using my debit card.
In Canada the system is different. Not everyone even has a credit card so lots of people use debit (our ATM cards double as our debit cards). I've used debit thousands of times throughout my life and had very few issues with it.
I agree with CC or debit ran as credit for large purchases, but if it's a small amount, it often doesn't matter.
I must be one of those rare outdated folks who still uses cash from time to time...
Maybe someone can help me.
When I use my debit card, I have the option to use it as a debit (enter my pin), or use it as a credit card (sign).
Which is a batter option when using an ATM card for purchases, Credit or Debit? Does it matter? why?
@YouDidWhatNow?: I use this logic for online purchases. I also use it for large local purchases because of extended warranty and other member services. If I don't have cash, buying lunch, gas, or other small local purchases less than $50 or so go on my debit. Rarely I'll do small online purchases with my debit with vendors I trust.
My bank offers 4% APR interest on my checking account once a month as long as I use my debit card for 10 purchases in that month, so it's in my best interest to use it for smaller purchases. It's free money.
Veronica? No way! Sure, she's rich, but she's a royal b**** and her dad's a pain too. Betty is way cooler.
I'm a proponent of using credit always, but after switching to my new credit union, I wouldn't agonize about using my debit card.
My credit union offers zero liability for debit purchases, will allow me to dispute/reverse charges, and ties the card to a line of credit with no-fee overdraft protection. They even refund ATM fees.
The only thing I don't get are extended warranty protection and rental insurance.
Wrong on all accounts, it's Paper, Ketchup, & Betty.
@bloggerX: it's like Ginger or Mary Ann.
BTW, Mary Ann. She ain't fooling me with that nice girl stuff!
That is 100% correct. The only time to ever use a Debit card is NEVER.
...the problem is that every time you use a card, whether credit or debit, there's a non-zero risk of someone somehow swiping your card data and using it fraudulently.
So it's not about the size of an individual transaction. It's about not ever exposing your debit card information. The $15 purchase you made is insignificant - the thief who got your debit card info and then proceeded to empty your bank account after your $15 purchase is going to have all your money, and you'll have no way to get it back.
@formatc:
Well, you have to try to balance that extra interest against the risk of having your debit card data exposed to a thief every time you use your debit card.
I would recommend using a bank that gives you interest on your checking account without such a requirement to use the debit card. Which is a pretty bizarre requirement anyway - I can't think of any reason why a bank would care one way or the other if you're using your debit card or not.
@dragonfire81: Well ideally debit cards pose no problems. It hits the fan when something unexpected happens. Something like the transaction being charged differently / unexpectedly (borked computer).
Archie chose Veronica - in fact, he just proposed. Dude better have a good pre-nup.
...huh. I guess I can see a possible use for Betty and ketchup at the same time, but what are you going to do with the paper?
I hate cash. There are the reasons listed above but it also takes longer to check out and unless you are paid in cash it's yet another stop for you to make at the atm/bank.
@floraposte: Just yesterday I called someone Mr Weatherbee, and my friend gave me a really weird look, saying he hadnt read archies comics in years.
I realized, neither have I. And I grew up with them.
@dragonfire81: Not at all. I use cash for most purchases, debit card only when I realize I don't have enough cash and forgot to cash a check at work, cc for major purchases & major emergencies only. Cash is the sho 'nuff reality checker: can't spend it if ya don't got it (and no need for fraud liability, too!).
@EBounding: Thats a bit extreme. I used to do that every 2 weeks, but then I realized that the world wont end if I do it when I get the statement.
But then, some people need it to be able to keep control over their spending.
Cash is still king with me. I don't even own a debit card for the reason there's no/little protection if you loose it and someone drains your acct.
I like cash over credit and don't even carry my credit cards unless traveling or when I know I want to use them for something. Remember how TJX (TJ Maxx) got hacked and lost millions of CC #'s? how about the recent network soltutions heist of C data? That's why I like cash.
If I get mugged the mugger gets ~$100-200 cash but I don't have to worry about contacting the CC companies or identity theft. IF I had my 3 CC cards I'd be out ~$150 anyway so it's a close call.
In the end though it's the anonymity of cash I like. Nobody is profiling my spending habits and storing all that data on me.
@Xerloq: Have you tried to dispute/reverse a charge on your debit purchases yet? I am curious to see if the process is any different/harder than disputing/reversing a credit card charge
@ndonahue: It partially depends on your bank. Some banks charge you for using debit (Chevy Chase), while others (ING Direct) actually give you an incentive like cash back for choosing debit. Supposedly there is more security with using credit as you get a lot of the same protections as regular credit cards and there are some people that are skeptical about putting in their PIN all over the place. I think most people here would probably tell you credit is the better choice.
@dragonfire81: I switched back to using cash for most of my everyday purchases this year instead of swiping my debit card at multiple retailers. If the purchase isn't large enough for me to feel unsafe about carrying a huge amount of cash to make it, then I'd rather not hand over my debit or credit card. If I'm buying something high in value or buying online (even to pay bills), I go with the credit card all the way. I work in customer support and get calls everyday from purchasers who have had orders that won't go through on our website and attempt the transaction over and over only to have their debit card authorized multiples time pulling the cash straight out of their bank account and held by their bankd for up to 10 days. Moral of the story, cash for small everyday purchases, debit for taking cash out of the atm, and credit card for large purchases or buying online.
@YouDidWhatNow?: Precisely, and also the amount of the transaction is irrelevent because you can't predict when a merchant is going to screw up. If you put a $2 cup of coffee on your debit card and the merchant makes an error and overcharges you by $100, you bet that you would want to dispute it before your money's gone (hence, credit card) versus discovering you're out of $100 and fighting to get it back.
@ndonahue: Some places don't have to pay the transaction fee if you hit debit and enter your PIN. The problem I always have is that you have to enter your PIN. That's private information, and not for prying eyes. Perhaps I'm being overly paranoid, but even if you're at the grocery store and there's no one around you - there are still cameras in the grocery store, and there are still people who are close enough to see your fingers.
Personally, if I had to use a debit card, I would do credit to avoid entering my PIN.
@bitslammer: If my credit cards get stolen, I can be on the phone in the next half hour and the thief gets none of my money. How do you figure you'd be out $150 if the thief took your credit cards? Just call and get them flagged for fraud and canceled.
@The Porkchop Express: Mustard. On Veronica.
I feel pretty confident about her skills, given the right condiments.
@YouDidWhatNow?: Or there's the overdraft fees from that $15 when it turns out a deposit didn't clear as quickly as expected.
Our new office's cafeteria doesn't even accept cash.
@The Porkchop Express: He's called "Juggie" for short, I believe; perhaps he and Mostly Harmless are particularly good buddies.
Those who don't know the hilarious Comics Curmudgeon blog should go forth and enjoy: [joshreads.com]
@pecan 3.14159265: I think - and i am not sure - that the 150 is your liability or something when the thief goes on a spending spree before you can cancel your cards. Again, I only have a really vague recollection of having read that somewhere.
Betty or Veronica? Put your hands together!
Same for the Veronica and mustard thing!!