3 Reasons Debit Cards Beat Credit Cards

Debit cards get absolutely no respect.

Talk with enough personal finance experts and you can collect a laundry list of reasons why credit cards are better than debit cards. For some consumers, a credit card is better than a debit card, but if average credit card debt statistics are any indication, many consumers would be better off using debit.

You can’t fall into the debt spiral with a debit card. Credit cards offer all sorts of great perks and rewards, some of which are matched by debit cards, but they are also a gateway into a world of debt. If you can’t pay off a credit card bill in full each month, you’re paying double digit interest rates. Those double digit interest rates are liable to keep you in debt for a very long time and it is too high a price to pay for those perks and rewards. Getting 1% cashback on your purchases and paying 18.99% in interest charges is not a good deal.

Some debit cards offer cashback. If you look hard enough, some debit cards are offering cashback just like credit cards. PerkStreet Financial offers 2-5% and ING Direct, for a limited time, offers cashback on their Electric Orange debit card. If cashback is the only reason you’re using a credit card, consider looking around for alternatives.

You are always approved. Since a debit card is merely another way to access your own money, no credit is involved. Your credit score takes a hit with every new credit card application, whether or not you’re approved. You don’t build any credit with a debit card though, as it’s off the credit radar.

When it comes to the things that matter, such as fraud protection, debit and credit cards are more similar than they are different. The crucial difference is that with a credit card, you can spend money you don’t have (which is exactly what they want) and pay for it for quite a long time.

Jim writes about personal finance at Bargaineering.com.

Comments

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  1. catnapped says:

    Crooks love them! Kiss your bank account contents goodbye!

    • Pax says:

      My debit ard has a VISA logo on it, and I am afforded all the same protections against fraud and theft-of-card that any VISA credit card holder has.

      • Bativac says:

        Me also. Visa Fraud Prevention has called me at least twice regarding weird transactions that showed up using my debit card. Maybe 1990s non-Visa branded debit cards don’t have any protections on them…

      • Coelacanth says:

        Except, you know, the liquidity crunch when the contents of your bank account are still not available while VISA and the banks complete their investigation, or the possibility of overdraft fees, or fees/penalties other companies might charge after their ACH debit attempts are declined due to insufficient funds.

        It might be your money, but you also need to be assured *immediate* access to it in the event of fraud.

        • Pax says:

          A liquidity crunch of maybe two business hours. My Credit Union is pretty good about that sort of thing.

          • AK47 - Now with longer screen name! says:

            Mine too. Plus, we have a couple hundred bucks cash tucked away at home, in case there’s any sort of error with our accounts we know we can still cover food, gas, etc. until it’s resolved.

            It’s a lame argument, but people love to cling to it.

          • George4478 says:

            Yet, we see story after story of banks dragging their feet over overdraft charges from fraudulent/mistaken transactions. Of people having to contact state agencies to get fees refunded, etc, etc.

            Two hours and you’re good to go with everything squared away? Right.

            • ORPat says:

              Yes right.

            • FrugalFreak says:

              “Banks” is the key word. Banks for profit, Credit Unions are not.

              • jamar0303 says:

                Unfortunately, credit union membership is limited. And in the few that aren’t, I’m hard-pressed to find one that has a clue about doing things overseas. Banks aren’t all evil. I keep saying, try some Asian banks, you’d be surprised (not HSBC- they’re really popular in Hong Kong for a reason, but that hasn’t carried over to their US operations).

                • FrugalFreak says:

                  Sorry but I’m not for multi-Globanazation of the workforce. I like American just fine thank you.

                  • jamar0303 says:

                    For WHAT?

                    Incoherence aside, I’m going to try and guess what you mean and assume you don’t like work being outsourced. Seeing as how they can’t teleport in tellers and other employees on demand from their home countries to work for a day in America, they hire locals. Granted, the Asian banks rarely hire non-(home country)-American people unless they’re proficient in the languages required (Chinese for BEA, Korean for Shinhan, etc), but they’re American all the same (unless you’re one of those folks who think that they’re not truly American because they’re ethnically different, but that’s another story altogether).

                    And you’ll never understand the people who travel and have to get stuff done overseas with a viewpoint like that. With one of my local credit unions I could be charged $5, a percentage of my withdrawal, and an undefined fee charged by the ATM operator to withdraw my cash in China. Or I could wire it for a flat $25 fee. Alternatively, Wells Fargo lets me wire it for less than a third of that. Ah well.

          • bravohotel01 says:

            A liquidity crunch of ZERO minutes, ’cause it isn’t my $$$ that is in dispute.

            No checks will bounce
            No denial of access to funds
            No loss of piece of mind

            Keep your debit card and best of luck to you and your “liquidity crunch of two hours.”

        • ORPat says:

          One of the first things my CU did was go over the items pending that should go through. Then any fraudulent charges that went through were reversed and then all overdrafts were suspended, and then a new card was sent out immediately. All in the course of several hours. I went to the CU the next day and signed a fraud report. The End. Didn’t cost me a penny, and all according to the rules set out by VISA in my debit card contract.
          It must suck to have such a bad financial institution. My account was opened in 1977. I have never had a problem with my CU that took longer than 24 hours to correct.

          • Extractor says:

            And if I see somehing wrong on my credit card charges, I click dispute from my chair. I dont go into any bank. In fact my new eBanking from BoA prohibits that unless I want to pay for the visit. And anything disputed has not cost me anything. Currently trying to turn all my debit cards into atm only.

      • ORPat says:

        Mine does too. I have had a couple of occasions where it was compromised and all the moeny was back in may account within hours. Helps that I use a Credit Union instead of a Bank

    • you-toe-pee-an says:

      Tell me about it. Every time I’ve seen someone entering their PIN in a supermarket I want to ask them for all the money in their wallet- “because it’d cost you less than using your debit card in a supermarket.”

      Also, “debit cards can’t land you in a debt spiral”? Okay Consumerist, you reported on this LAST WEEK: http://consumerist.com/2010/10/chicago-restaurant-owes-118k-in-overdraft-fees-may-have-to-close.html

      “Some debit cards offer cash back” – Some credit cards offer MORE cash back.

      The trouble is that credit card MARKETING has very little regulation. People should know they’re getting a 20% APR or a $200 annual fee before they sign up for a credit card that would only be useful for some experiment seeing how fast you can drain your life savings. The term APR should be required knowledge for kids in high school.

      I have a credit card and a debit card, both with mastercard logos. Neither of them has an annual fee over $5. One of them grants me frequent flyer miles per the dollar. Before that, I got 5% cash back on my credit card.

      And sometimes, people should spend money they don’t have, i.e., you’re making $200,000 a year and your savings amounts to nil when you need to furnish your apartment for professional visits. A credit card company would be glad to take your means into account and furnish you with enough money to buy furniture- and in this case, the APR is drastically lower than overdraft fees.

      It’s called financial responsibility. If you don’t know how much money you have at any time, you need to go to someone who can help you get organized and find out. If you think you know and you’re wrong as in you overestimated your savings, you could do with some help as well.

      • ChuckECheese says:

        Somebody who makes $200K/yr and has no extra money for furniture is not being financially responsible. Rather, I’d suspect some sort of addiction.

        • guroth says:

          Addicted to fashion, baby!

        • oldwiz65 says:

          If you are earning 200K per year you should have at least 50K in savings. what are you going to do if you lose your job in this recession?

          • Bibliovore says:

            Not if you’ve just recently landed that good job. Yes, of course it’s good to have the savings, but if you’re just starting out and you’ve got some expenses — perhaps a better example than furniture would be buying sufficient business clothes for your first suit job, or winding up with emergency travel or car repairs or medical bills before you’ve had enough of those large paychecks to build that savings account — then yeah, credit can be useful and appropriate.

      • Kishi says:

        Some credit cards offer MORE cash back.

        But less cash back when you factor in paying interest.

        The trouble is that credit card MARKETING has very little regulation. People should know they’re getting a 20% APR or a $200 annual fee before they sign up for a credit card…

        Those terms are always on the application. The credit card companies can’t force people to read things.

        • SabreDC says:

          What interest? I haven’t paid interest on my credit card in about 5 years.

          This article is apparently written for people who have the money in their accounts, as would be required for debit cards. If those people switch from debit to credit, they’d have numerous benefits available such as building stronger credit, getting more cash back, having chargeback protections, and in some cases, having extra merchandise warranty protections.

          • The Marionette says:

            You haven’t, but remember you’re not the world, others have interest on their cards. I honestly don’t see the need of credit cards to build credit if the person already has good credit.

          • Pax says:

            … how about the annual fee?

            • Bibliovore says:

              There are lots of good rewards cards out there with no annual fee. Get one of those and pay it off in full each month, and you’re not only getting the rewards for free, you’re continuing to earn interest on the purchase amounts for a month or more until the credit card bill is due.

            • Loias supports harsher punishments against corporations says:

              Never paid a fee for a credit card in my life.

              • Chris says:

                That’s what I used to say until I realized the merchants pay fees to the credit card companies for each transaction. We pay the fees in ever-so-slightly higher costs for products and services.

                So yes, we all pay credit card fees.

    • Bohemian says:

      I use my debt card as a credit for most transactions. That gives you the regular visa protections and if you have a decent bank you won’t be out your entire account balance due to fraud or theft.

    • Spifferiferfied says:

      You’re so right. I can’t even count how many times I’ve had my entire band account emptied in the ten or eleven years I’ve been using my debit card.

      P.S. I can’t count how many times because there’s nothing to count.

      • crazedhare says:

        Good point. I can’t count the number of car accidents I have been in because it is zero, so driving precautions are silly. Goodbye seatbelts, hello blindfolded driving. Car accidents haven’t happened to me, and that is irrefutable proof there is no real risk.

        Your logic? Just as fail.

        • Pax says:

          The point is, comparing the risks of a Debit card, to the risks of a Credit card. Can you, authoritatively and with corroborating, independently-verifiable evidence, show that Debit Cards are more of a risk than credit cards?

        • Spifferiferfied says:

          Your comparison is off.

          A correct comparison is “I can’t count the number of car accidents I have been in because it is zero, so I’m going to continue to drive as I always have.

          Sounds way better than not driving at all (not using debit cards at all).

    • TPA says:

      Indeed — One of my coworkers has had her debit card used fraudulently twice this year. Fortunately she kept enough cash in the account so that it didn’t impact her ability to pay bills, but she was still without $1,000+ until the bank decided she really wasn’t visiting former Soviet-bloc countries AND Florida on the same days.

      • Pax says:

        Your co-worker needs to think very hard about what ATM’s s/he has used, and educate themselves on what a “skimmer” is. Because unless they were foolish enough to keep the same card number and everything? That’s probably how they’re getting the information.

        And skimmers work on credit cards, too.

        That or they are doing business with a very shady company online – which also works on credit cards, with the added bonus of harvesting the CCV number, too.

        • TPA says:

          Their card wasn’t skimmed. An employee with the bank had unofficially admitted that it was due to a data breach of a merchant and/or processor. Skimmers in-the-wild aren’t that common.

          Now, clearing up the mess wasn’t a simple affair. As I recall, she had to contact her bank multiple times before they finally credited her back the stolen funds. It wasn’t a problem for her, but many people live hand-to-mouth and $1k missing from their bank account would put them in a serious bind.

  2. common_sense84 says:

    Dear god, this is the worst consumerist article of all time. This story deserves it’s own golden poo.

    Debit cards should never ever ever be used as a credit card. Ever. If anyone rips you off or you have a problem, you money is gone. You have to fight to get it back and while it is gone, you are broke or are being hit with bank fees.

    Credit cards are for gaining protection when buying things. No one has to hold a balance on a credit card. There is no debt spiral on a credit card, because you simply use it like your debit card, only when you have money to buy what you are purchasing.

    Credit cards do have cash back or points. They do offer you free insurance on rental cars and extend manufacturer warranties by a year. They do protect you from fraud.

    The crucial difference between a credit card and a debit card, is a debit card has no protects in it. The protection it claims to have are completely pointless because your money is initially gone and only returned if the bank decides you are a victim who deserves the money back(this can take up to 90 days). With a credit card, they can’t get a dime from you by force and they easily fuck over the business with chargebacks and force the business eat fraudulent purchases.

    • keepher says:

      I can’t believe I’m reading this here either. Just this week there was the post that an OP was double charged which sent him in to over draft hell.

      Come on, Consumerist, at least list the reasons why its not such a good idea to use your Debit card for things like gas purchases or hotel rooms.

      Or what you’re going to do when they’ve fouled up your bank account so bad you no longer have money for groceries.

      • Mphone says:

        he was double charged yes, but he also hardly had any money in his Bank Account. That is more on him than it is the card.

      • Gulliver says:

        If his credit card was in that same situation the credit card company would hit him with OVER LIMIT FEES. With that overlimit fee there will be a hit to his credit score.
        There is also this stupid idea that if you pay it off each month the credit score reads as zero utilized credit WRONG. If your credit issuer sends over the balance to the CRA on the 5th of the month and your balance is $399 of $400 available, but you pay it off on the 6th, guess what your credit utilization is? 99.75%. If you do that every month it will not help your score.

        This is one of those stupid arguments that people who want to think they are better than the average person because they use credit wisely tell us all the benefits of their rewards, cash back, fraud protections BLAH BLAH BLAH.

        Here are the facts for the AVERAGE US citizen:

        *debt per household is in excess of $15,000
        *has 3.5 credit cards per person
        * average interest rate is over 14%
        *total revolving debt in the US $852.6 Billion
        *4.27% of that debt is 60 days or more behind
        * 13.01% are in default
        * late and over limit fees add up to over $20 BILLION last year
        *26 % admit to paying bills late

        Credit cards are similar to crack cocaine, and the card issuers are the dealers. They like the people who use it in the beginning and give them a taste of having access to more money than they have in the bank. Then at the first hint of trouble, the LAST bill to get paid is the credit card. Imagine the unemployed guy who has decisions to make, do I pay the mortgage, the utilities, the car loan, car insurance, etc etc, or should I pay the credit card?

        • common_sense84 says:

          This is a pathetic argument. Essentially that people are stupid with credit and will buy things they cannot afford, so therefore credit is dangerous.

          Well this is stupid. The same people who don’t use credit wisely are the same people who rack up all kinds of fees with debit cards. Nothing is going to be good for them. And it makes no sense to give shitty general advice because of idiots that can’t handle money.

    • Pax says:

      “The crucial difference between a credit card and a debit card, is a debit card has no protects in it.”

      I enjoy all the exact same protections with my VISA-imprinted Debit card, that you get with your credit card.

      • ovalseven says:

        Same here. That’s exactly why I always use it as a credit card, and never a debit.

        I’m not spending money I don’t have, and I get the same protections as a credit card.

        • NeverLetMeDown says:

          There’s one key difference you’re completely ignoring. If there’s a fraudulent charge on my credit card, the card issuer is out the money while it’s resolved. If it’s on my debit card, I’M out the money until it’s resolved.

          • Pax says:

            Then your bank sucks. Seriously.

            When my girlfriend’s debit card was stolen (in a mall, during the height of Christmas Frenzy), and the thief made off with a $200+ charge (which was nearly a third of her monthly income at the time), she went straight to the bank … and do you know how long it took her to get her money back, once she got there?

            Twenty minutes, from the time she walked in the door.

            The money was put back in her account before the girl even called the store (Macy’s) to ask for a fax of the signed receipt. IOW, before they even truly “investigated” – she looked at her shopping patterns, and said “yeah, that does look out of character for your account. Let’s get this fixed right now.”

            That’s the main reason I switched banks, in fact. I had been with Signet Bank before that, until someone forged my endorcsement on a third-party check, at an out-of-state branch, with an out-of-state I.D. … and the bank refused to investigate at all.

            I feel 100% secure with my credit union, using my debit card for everything.

            • Etoiles says:

              I had a fraudulent charge on my debit card (that I use frequently both online and in stores) two months ago… other from the inconvenience of being mailed a new card and having to memorize a new number (I’d had the old one for six years and am a frequent online shopper, eventually I just learned it all), the entire issue was solved within 15 minutes of my placing the phone call, and the money was refunded to me within 24 hours.

              And that’s from one of this site’s favorite “big evil” banks.

              • common_sense84 says:

                It’s still a risk. You never know when the bank is going to decide to rule against you. It’s a huge risk.

                There is no point in taking this risk. Use a credit card and you won’t be giving people direct access to your funds.

                This is the same reason you should never ever use checks.

          • azzie says:

            Actually it’s not so straightforward…

            If you dispute a transaction and bank credits it back, there is no problem regardless of card being credit or debit.

            If you dispute a transaction and bank DOES NOT credit it back (say, because it is “investigating”), it will appear on credit card statement and you are responsible for paying it. And it will accrue interest as well.

            So if bank acts slowly, you are out of money either way. The only benefit of credit card in this situation is grace period…

          • Yentaleh says:

            Hmmm my bank will issue me a credit onto my debit card (immediately) until its resolved. If its my fault then they deduct the money if its the other issuers fault then they go after them with a vengence. (Of course my bank is a credit union, where things are done differently.)

            • common_sense84 says:

              That is not guaranteed. The credit to your account is a courtesy that they can take away at any time.

              Also even if they give you the credit, if next week they decide you lost the claim, they automatically take the money back. It is never a good idea to give people direct access to your funds. It’s just plain stupid to do this.

              A credit card company cannot touch your accounts without going to court and getting an order. Or in the case where the credit card is under your bank. Then the bank can actually steal your money to pay the card. Which is why it is also important to make sure your credit cards are not under the same bank as your accounts.

              Again, it is very very important to not use anything that could result in fraudsters having direct access to your funds. It’s dangerous and stupid. You have no protections against anything if you do.

      • LiquidSunshine says:

        Only as long as Visa says you do. With credit cards, you have legal protection against fraud. With Visa debit cards, you only have Visa’s word that you’ll be protected. They could withdraw this protection at any time simply through a change of their contract.

        And as others have pointed out, since you have to fight to get your money back into your account with a debit card, it is not the *exact* same protection.

      • baquwards says:

        Not if it is a PIN transaction, those are approved through different channels, NOT VISA, so visa’s zero fraud liability is of no use to you, it is now between you and your bank to battle out!

        People really need to learn about the differences with debit and credit cards

        • ORPat says:

          Yes, even if it appears to be a pin transaction.

          • madmallard says:

            the protections of a PIN transaction are only as good as the bank issuing the card.

            the protections of a VISA logo transaction on a debit card are only as good as Visa’s word.

            • Pax says:

              “the protections of a VISA logo transaction on a debit card are only as good as Visa’s word.”

              And the protections of a VISA logo transaction on a credit card are only as good as Visa’s word, too.

              Your point was?

              • common_sense84 says:

                He is ignoring the reality of the situation. VISA’s word doesn’t matter. The bank issuing the credit card is what implements the protections.

                And they do implement the same protections, but again, the money is initially gone. And they can make you go without the cash until they rule on if you should get your money back. This can take up to 90 days. So they can safely rule against you, because they already have the money. With a credit card, they could rule against you, but they can’t get the cash. And they could send it to collections and try to collect, but they are limited because if you went in front of a judge, odds are the judge will rule against them.

      • craptastico says:

        i’ll remember that next time i read about someone double charging a debit transaction that leads to a chain reaction of bounced checks or hundreds of dollars of overdraft fees. Consumerist usually posts about one of those articles a week so i won’t have to wait long.

    • Weapon X says:

      Well put common_sense84!

    • cheezedawg says:

      Amen

    • Me - now with more humidity says:

      Bzzzzzt. Wrong. But thanks for playing. There’s this internet thingie called Google. Or wait, easier yet… just click on the link at the top of this story to the other story that debunks everything you’ve written.

    • ArizonaGeek says:

      Using a debit card is actually bad! And I found out first hand because my card number was stolen just last week, Visa fraud called me to say almost $1,000 was spent in Canada in about 5 minutes. So I called the bank and got a new card, they told me that if it had been used as a debit card I would only be covered for $50 but since it was used as a credit card Visa would cover the full amount. Lesson learned, always use it as a credit card where possible! Oh, and never ever let it leave your sight!

    • areaman says:

      +1 for giving Golden Poo to Jim at Bargaineering.com.

    • Ronstar says:

      Unless you use Regulation E. Its a federal banking law that says if you contact your bank, they have to give you provisional credit while they research the case. That means, if you check your account, and its hit for a phantom $500, call the bank, and they HAVE to put $500 right back in until they figure out what happened.

  3. Ephraim says:

    Only one reason that I hate using my debit card through the credit card system… the word “Approved”. It’s my money… I don’t need their approval, I need their confirmation of the available funds.

    One reason you may not want to travel with a debit card with a MasterCard or Visa logo…. the inability to process debit transactions outside of the US. In Canada there is no credit/debit button and all transactions must be processed as a credit card. Direct payment in Canada requires a card that is not a hybrid and is on the NYCE network. (And as of January 2012, may require a chip & pin, which only one bank in the US currently issues.)

    • abberz3589 says:

      I had a debit card with a Visa logo and had absolutely no problem in Europe buying things or getting money from ATMs. What is your point?

      I like using my debit as a credit card. When I do that, I get points from my bank too and don’t have to worry about spending (or being tempted to spend) money I don’t have. I get a $25 Visa gift card every month or so. It’s a fairly good deal.

      I only use my credit card for huge purchases.

    • ORPat says:

      Not true. I use my Hybrid card in BC all the time

    • Alvis says:

      What a weird thing to complain about.

    • GrimJack says:

      Yup – the transaction was “Approved” because you had the money in your account. This isn’t a loan application, it’s a transaction. Whether it’s checking against your bank balance or available credit is irrelevant, the transaction is either approved or declined…

    • QOTSA says:

      THIS!!! I cannot count the amount of times I have been yelled at by an American who wants me to run his card as debit… when I physically can’t! Canadian financial systems automatically run them as credit.

      • Traveller says:

        That sounds eerily similar to a story I was told by a girlfriend’s sister when I was visiting New Brunswick.

        Slight background info, for clarity’s sake: New Brunswick utilizes Harmonized Sales Tax (HST) rather than the normal PST/GST system.

        A woman from New Hampshire comes into the store and buys a few items. The sister relays the amount, including HST and the woman from New Hampshire goes ballistic, wondering why she has to pay tax. “We don’t pay tax in New Hampshire,” the woman cries. The sister’s response was rather low key, but was in effect, “This is the price. Pay it or don’t buy.” The woman bought.

        I was told this, and I told the sister my response, which was “I wish I was behind the woman so I could tell her that she’s in Canada. They are their own country, with their own laws, and them letting you into the country means you are subject to those laws. That means HST.”

        Of course, the irony was that two days later I got floored because Future Shop doesn’t accept American currency and had a outburst of my own. I asked them to hold the item, got Canadian money, paid for the item, and APOLOGIZED for my outburst, explaining that I wasn’t prepared for it because everybody else in the area accepted US currency. They accepted my apology, which goes to show how friendly Canadians are.

        That New Hampshire woman though didn’t have the intestinal fortitude to admit she was wrong. She felt that because she was an American citizen, Canada should follow American laws. And we in the US have to wonder why the rest of the world hates us? Look no further than the woman from New Hampshire.

  4. ben says:

    “Some debit cards are offering cashback just like credit cards” isn’t actually a reason that debit cards beat credit cards. The only real advantage listed is that they don’t allow you to spend money you don’t have. And if you’re capable of managing your money, that reason doesn’t even apply.

    • Bargaineering.com says:

      I agree… which is why that reason was listed first. :)

    • FrugalFreak says:

      another benefit of using debit is to not finance the bonus & rewards of those that use credit cards. Just knowing that I don’t contribute leaves me happy.

  5. stock2mal says:

    It seems that you CAN fall into a debt spiral with debit cards, what about having over 100k in overdraft fees?

    • Geekmom says:

      Easily fixed, refuse overdraft protection. I get declined sometimes, but it beats the hell out of over draft fees.

    • Pax says:

      Opt out of overdraft protection, and the debt spiral gets cut off at the knees. Problem solved.

  6. jesirose says:

    My biggest pet peeve with debit cards is that for a while when I was trying to recover from debt, I only used a debit card. It was a debit card, NOT a debit/credit card. I would ask stores if they accepted debit, and be told yes, do my shopping then they’d insist they could run my debit card as a credit card. No, you can’t. Not ALL debit cards are credit cards. I keep my debit card as debit only to avoid fraud if I lose it. If I lose a real credit card, I’m not concerned. If I lose my debit card, the fraudster needs my PIN and doesn’t have it.

    • common_sense84 says:

      That’s nice, get a real credit card. And use that to filter your purchases and to prevent fraud.

      • jesirose says:

        Uhm, thanks…I have a credit card already. Did you actually read the content of my comment?

        When I was trying to GET OUT OF DEBT I only used a debit card. Your suggestion is that someone who has several thousands of dollars in debt on credit cards, should use a credit card? What are you smoking?

        If I want to charge something, I can use a credit card now. But if I want to use a debit card for a debit transaction, and I ask if a merchant accepts debit, they should realize that debit != credit.

        So, basically, fuck you for judging me without even reading the damn comment.

  7. cheezedawg says:

    Here are the three reasons that credit cards are superior to debit cards that easily trump the 3 weak items listed above:

    #1- You get to float the banks money for purchases. If you time it right, you can get almost 2 months. This can be huge for large purchases.

    #2- In the event of fraud or disputed transactions, it is the bank’s money on the line instead of your money. You are not fighting to get your money back, and instead the bank is motivated to resolve it.

    #3- Credit cards are flexible. If you are backed in a corner, you don’t _have_ to pay anything more than the minimum payment. This should be done rarely and with caution, but it is nice to have the option.

    • Pax says:

      If you’re not paying the whole balance every month, then you’re paying interest every month (or week, or even day).

      “Compound interest is the most powerful force in the universe.” — Albert Einstein.

      Welcome to the debt spiral.

      • unpolloloco says:

        Unless you aren’t carrying a balance….in which case you can get almost 2 months of an interest-free, fee-free loan.

        • Pax says:

          The only way not to carry a balance, is to pay well above the minimum payment each month.

          • thompson says:

            Uhh…. yes? I don’t see what the point of this comment is. The benefit of credit cards is that, if you pay in full, you’re getting a one to two month interest free loan (charge on the 3rd, billed on the 29th, due on the 27th of the following month).

          • bravohotel01 says:

            The only way to not get hungry…

            …is to shove pie in the hole every 6 hours or so.

            Captain Obvious saves the day again!
            ZAPPPO!!!

      • cheezedawg says:

        I’m not sure why you felt it was necessary to point out the obvious.

  8. konakonachanchan says:

    Credit card companies fight to get the money back because its their money (lots of defaults going on right now). Debit card companies don’t care about the money because its not their money. They won’t even make a phone call to help you get it back and are as unhelpful as possible. Maybe you’ll get the money back – in 90 days when you have $100 in overdraft fees that they won’t waive. Or maybe it will be how it was when I had fraud on my card – after 90 days they decided that anyone who has my card number and expiration date can take money out of my account and say you can’t appeal the decision. When they say you don’t have to pay fraudulent charges, the burden of proof is on you to prove it was fraud.

    The article has this all wrong – You should still use a credit card, but only if you have the money in the bank to pay for it at the end of the month. Using a credit card as a mini-loan system is just dumb.

  9. Nick says:

    I’m not a fan of these “bargaineering.com” articles. They are usually filled with oversimplified half-truths. Consumerist has covered the credit vs. debit debate in far more detail in other posts.

    Also, let’s not forget Charge Cards (e.g., AMEX green/gold/platinum). No allowance for revolving balances means no debt spiral, but still have full credit card protections (often very good ones), rewards programs, and buffers your bank account from direct access by crooks.

    • MrEvil says:

      Unfortunately more and more merchants are telling AMEX to take a hike. A tire dealer my dad and I trade with for nearly every tire on our farm stopped taking AMEX. My dad inquired as to why, they told us it was because AMEX was taking a bigger cut of every sale and to top it off took 6 weeks before they saw their money. VISA and Mastercard had the money in their account instantly.

  10. PLATTWORX says:

    I am REALLY taken aback that this story was posted.

    I have read this site for a very long time. The number of people who have written in because they have been victims of fraud or been unable to secure a refund they deserved from a merchant because they used a debit card that did NOT offer them the protections of credit cards is countless.

    Over and over people have rightfully responded to the OP that using a debit card puts their own money at risk and is often the root cause of most of their problem. Had they used a credit card, it would not be their money tied up and they would have countless chargeback rights.

    All that said, how anyone can post a story that says “3 Reasons Debit Cards Beat Credit Cards” escapes me.

  11. milty456 says:

    I was going to comment on how absurd this article was and how ashamed consumerist should be for posting it for all of the reasons already specified….I was very happy to see the comments and agree with them all. Who is allowing stuff like this to be posted over there?

  12. Mr_D says:

    And while we’re at it, overdraft protection is a good thing! It prevents those oh-so-embarassing “card declined” messages. It’s like social suicide, I tell you!

  13. NeverLetMeDown says:

    Point 1: The author argues “debit cards are better, because you can’t use them irresponsibly.” This is somewhat true. The same logic would dictate, however, that a Yugo is better than a Ferrari, since, if you drive really fast, you can get tickets in the Ferrari, while the Yugo, since it can’t go above 50, won’t get you tickets.

    Point 2: He points to one account that gives you GIFT CARDS back. Not cash, gift cards. My Amex card gives me 2% back in CASH, and has periodic promos up to 5% on certain types of items (like the card he references). So, he’s saying that debit cards are better because ONE checking account is comparable to the upper end of the credit card scale? That’s like saying that, if I manage to play LeBron James one on one, and we tie, that all white guys who can’t jump are better than LeBron James.

    Point 3: Clearly, if you can’t get a credit card, then the credit/debit debate is moot. Also, if you apply for lots of credit cards, that will have some (but not much) impact on your score. Again, to use the analogy from point 1, this is like saying that a Yugo is a better car than a Ferrari, since you may not be able to afford a Ferrari.

    • Gulliver says:

      Actually what he is saying is the Ferrari costs you more, AND could lead to trouble for your tickets. The Yugo will serve its purpose in getting you from point a to point b, but YOU prefer a Ferrari because it somehow makes you think you are better.
      I wonder if the analogy of people who buy Ferrari’s are usually middle aged losers who have small dicks is the same as those who use certain credit cards.

      • NeverLetMeDown says:

        Way to consciously ignore the point of the analogy. The Yugo only helps you avoid speeding tickets because it CAN’T EVEN REACH THE SPEED LIMIT.

        • Gulliver says:

          Way to make a stupid analogy that doesn’t make sense and is flawed from the start, If you want to make stupid analogies, I can make them right back, which is what I did. If you can;t make a coherent argument, and you want to play dumb analogies we can play it all day long.

      • FrugalFreak says:

        +1 Elite are fools in costumes.

    • Extractor says:

      Point 1- If your going 50 on a freeway, thats impeding traffic which is a ticketable offense.
      Ive never gotten a ticket at 80 or for that matter when i got warned at 124.

  14. aviationwiz says:

    I was shocked to see an article like this on the Consumerist. Normally the Consumerist is (rightfully) posting about the potential hazards of using a debit card as credit on a regular basis. Then I see this get posted? Bad Consumerist!

  15. baquwards says:

    you are NOT always approved! A visa/mastercard branded debit card often requires a soft pull on your credit. Often when pin based transactios are declined, choosing to process as credit works. I know plenty of people who have not been able to get branded debit cards, heck if their credit is bad enough, they can’t get a checking account.

    • Gulliver says:

      That would not be their credit score, it would be from having a history of NSF cheecks. Your credit score does not determine your ability to bank with anybody. Your failure to pay fees, or a large overdraft or something of that nature is the only reason they will deny. Your score can be 490 and still qualify for an account if you havent done something illegal (check kiting etc)

      • baquwards says:

        But having a visa/mastercard branded card often requires a credit inquiry, since they are guaranteeing the merchant will get paid when the transaction is signed for, therefore the bank is extending you a little bit of credit.

        Back when my credit was on shaky ground I was declined for a visa branded debit card, I had never bounced a check or done anything illegal. The credit union manager was able to override the decision and get me a debit card with a visa logo on it.

        • gman863 says:

          FAIL!!!

          There are a crapload of Visas and MasterCards you can get with your name imprinted on them. Pay an initial set-up fee, hand over some jack and the card is good for whatever balance is left.

          To re-load the card, go to the store that set it up (Wal-Mart, Kroger, etc) and fork over more cash at the service desk.

          Hell, the Texas Workforce Commission (a.k.a. unempoyment office) pays benefits through a MasterCard issued by Chase. The card is imprinted with the name and it is reloaded every time benefits are paid.

  16. BeyondtheTech says:

    You also forget one important reason – debit purchases are instantaneous. I’ve been screwed one too many times by credit purchases on my debit card taking up to a few days before it actually posts to your account, and it can really throw off your budget.

  17. aloria says:

    This article is almost as bad as the one recommending people create one strong password + the name of the website its being used on as a way to have “different passwords for all sites.” Do they just not stop to think critically about what they’re posting?

  18. AK47 - Now with longer screen name! says:

    Um . . . this whole thread is ridiculous.

    Credit cards and debit cards both have advantages and disadvantages – – it depends on who you are and how you plan to use them.

    I would hesitate to call either one ‘safer’ than the other. Identity thieves have a field day with both types, and credit card companies and banks both seem pretty adept at screwing consumers, regardless of which type of plastic they use.

    • richcreamerybutter says:

      “credit card companies and banks both seem pretty adept at screwing consumers, regardless of which type of plastic they use”

      Exactly. I once had a friend who would refer to carnival rides as “useless motion.” That’s kind of how I feel about any “reward points” offered by credit cards to be third party detour handlers of my money. I’m sure I could somehow get my money’s worth in terms of “rewards” vs the amount of my interest rate if I devoted some time to the project. I prefer using my free time for other hobbies, so I like to keep the financial transaction areas of my life simple. I’ve also found I spend less money with debit cards as opposed to credit cards (personal flaws notwithstanding, at least I’m not in debt). Others find that credit cards are more suitable for them personally, so I don’t see the point in pitting the two against each other.

      In any case, I divide my money over a couple of accounts and dedicate one to purchases. Even during a worst case scenario in which the bank outright refused to reimburse me, I wouldn’t be completely wiped out.

    • craptastico says:

      i love how one of the 3 reasons debit cards are BETTER than credit cards is that they offer cashback the SAME as credit cards. the editor here really needs to learn what the word “better” means

  19. Crazytree says:

    The odds of a consumer having their account drained by a crook with no reimbursement by the bank vs. the odds of a consumer mismanaging their credit and ending up in a “debt spiral.”

  20. blinky says:

    Debit card: unlimited credit line (as big as your savings). Debit card: empty bank account until you prove it’s been hacked. ‘Cept for those, it’s the same thing as a credit card!

  21. richcreamerybutter says:

    No matter what type of payment you use, it’s important to be educated on the pros and cons of each. I have my own reasons for using debit, but would never negatively criticize others for using only credit cards.

    I think rather than admonishing the author, perhaps consider that for particular people these points hold true. I don’t think he’s saying, “debit is conclusively better than credit” but rather, “debit is better than credit under some circumstances.” About 10 years ago, the general public also had the same collective reaction to experts who would dare contradict the popular opinion that owning a home is always superior to renting.

  22. sparc says:

    i’ll fix the title for you…..

    3 Reasons Debit Cards Beat Credit Cards (for people who have no self control on their spending)

  23. Razor512 says:

    Debit cards with cash back are almost scams. At least with chase, they charge a annual fee where you must charge close to $6000 to just break even with the annual fee. After that you start to get cash back.

  24. laphroaigh says:

    I have to agree this is a very poor article…I agree with the other posters. There is almost no…NO…reason to favor debt cards over Credit cards.

  25. Not Given says:

    One of our banks has been giving us a 5¢ bonus for every time we use our Visa debit as a credit, awarded once a month.

  26. hansolo247 says:

    Who pays double-digit rates for credit cards? Who would do that?

    While my card has a single-digit rate, I’m not dumb enough to actually pay them any interest.

  27. yikes says:

    This has to be the most misleading and vague (lacks many details) article written that I have ever seen on consumerist.com. First, the title should be rewritten to state “3 Reasons Check Cards Beat Credit Cards”. Second, you can fall into the debt spiral with a debit card. With overdraft protection, it is possible to occur interest charges just like credit cards. Third, some debit cards offer cashback. However, he forget to mention the many terms and exclusions. He mentioned that PerkStreet Financial offers 2-5%, but failed to mention that ING Direct only offers a measly 1% cashback. Very few debit cards offer cashback and many rewards checking accounts offer cashback, but there are many requirements that must be satisfied before cashback can be rewarded. Finally, you may not always be approved. If you have a bad history with savings and checking accounts, I believe that they can deny you. There are also other reasons for which one can be denied when trying to open an account.

    I would like to see this article rewritten with clarification and along with details.

  28. TasteyCat says:

    +1. Came here to post this.

    • TasteyCat says:

      This was meant as a reply to the second post, saying this was the worst article ever. Saying debit cards are better than credit cards is an anti-consumer concept.

  29. goldgecko4 says:

    I can’t really hate on debit cards here… admittedly, I screwed up my credit in college (first credit line, car loan, medical bills, and the obvious student loans). So, of course, I couldn’t get a new credit card if I tried. That being said, I’m rebuilding my credit as we speak, and while I am, a debit/credit card is the best thing I could have; it gives me all the modern convinces of a credit card, and any money I spend is MY money, so I don’t have to worry about any (extra) bills at the end of the month. I think I’m lucky… mine is through a local CU, has a MC backing and security, and surprisingly great security, with no fees. So for those of us that don’t make 100k/yr, or have great credit, debit cards are a perfectly legit option.

    • Extractor says:

      And when you do have great credit, are you still going to use the damn debit cards and risk your entire bank account(s)?

      • FrugalFreak says:

        Yep just so not to support credit industry.

        • richcreamerybutter says:

          To me it’s a tiring, stressful hamster wheel of paying a third party so they will be gracious enough to allow your money to pass through their company to its final destination all in the hope you can generate some mysterious, sometimes ridiculously arbitrary “score” that will give you the privilege of spending more money you might otherwise save. Even if you use common sense such as paying off your balance every month, you are warned of other things you aren’t doing correctly (credit utilization, maxing out certain CCs to trick FICO scoring, moving too many times, asking for a lower APR, not asking for a lower APR, not completely paying off a closed card, etc). I’m exhausted just thinking about it!

          I think of this as a creative endeavor exercise, not unlike gaming or puzzles (and in some instances, gambling). Keeping up with CC rules, scores, and rewards brings certain people great joy, but I don’t want to be forced to participate just to enable CC companies’ profit.

  30. Rectilinear Propagation says:

    You are always approved.

    This is a flat out lie. There are banks that won’t give you a debit card if they don’t like what you see in your credit report and/or credit score.

  31. Nighthawke says:

    I’m sorry Ben, but Jim’s article is way off base what really happens between debit cards and credit cards. As for convincing me to switch, no. I’ve gone for a good 11 years with two CC accounts and I’m debit free through diligent management and budgeting the likes that God has never seen.

  32. gman863 says:

    The Consumerist missed a MAJOR point on an issue with debit cards that can TOTALLY SCREW UP YOUR BANK ACCOUNT and cause HUGE OVERDRAFT FEES or DECLINED TRANSACTIONS – even if the money is in your account.

    It’s commonly called a “hold” and is used by many types of businesses. Using a regular credit card, you never even notice it.

    If you use any card (credit or debit) and there is a line to enter a tip amount and total the receipt yourself (bar, beauty shop, etc), your account is being authorized for an amount 20% over the actual purchase. This extra amount is held in reserve by both the bank and the merchant until the tip (if any) is manually entered and the transaction is batch processed.

    Example: When your card is used for a $20 purchase at IHOP, your bank is sent an electronic message saying, “Pay IHOP $20 immediately AND put a ‘hold’ on four more dollars in case the customer charged the tip”. If you tipped less or tipped in cash, tough. Until IHOP confirms this, the four bucks is frozen in your account (up to 7 days). If you charge several meals per week, this 20% will add up quickly.

    Don’t even THINK about trying to trying to rent a car from a major company unless you have a REAL credit card or a HUGE reserve in your checking account. On a $49 daily rental, the agency will place holds equal to the actual rental amount, refuling amount (in case you return the car on “E”) plus a $300-$500 damage deposit. On a credit card, this is soft money – it will count against your available line of credit on purchases, but won’t result in interest charges or an Over The Limit Fee unless the final bill (not the hold amount) pushes you above your credit line.

    On a debit card, this is real money being frozen. The $49 car rental may freeze up to $600 of your money for up to 7 days from the date you return the car. If this causes your electric, gas and water bills to bounce, you’ll be out three bank overdraft fees plus whatever the merchat or utility charges for late payments and/or NSF checks.

    Hotels, carpet cleaner rentals, etc. also use holds as a form of deposit.

    Summary: Consumerist, you screwed the pooch on this article: WOW! That was a CRAPPY piece of advice!

    • gman863 says:

      Forgot to mention: “Pay at the pump” gas purchases often place a hold of up to $125 on your account (the maximum amount allowed by Visa or MasterCard in a single pay at the pump transaction).

  33. jamar0303 says:

    Sorry, no debit card I can find as of yet has the JCB logo, so not for me. Apart from AmEx (Costco CC, promo 0% rate until 2011, customer service that has yet to fail me), I need a loophole that only JCB offers. (iTunes Japan and a few other Japanese web-based stores only accept Japan-issued credit cards- except JCB; no matter where it was issued, it’s treated as Japan-issued)

  34. rndmnmbr says:

    Ever notice that every single way to access your money at the bank, saving walking in and withdrawing cash in person, is open to someone stealing your money?

    “Don’t use debit cards they’ll steal your card number and PIN and then your money is gone!” “Don’t write a check, they’ll steal your account and routing number and forge your signature and then your money is gone!” Well, if it’s a bad idea to access it with a debit card, and a bad idea to access it with a check, they why the heck did I stick my money in the bank to begin with?

  35. Extractor says:

    I dont get rwards from any debit card and if they are offered, they suck. Just got the latest issue of Consumers Report and they rate the best credit cards. I’ve got 4 of the best cash back cards out of 7 including the #1 card, Amazon Visa. Once this cycle is up, i’ll have over 25,000 pts good enough for a round trip ticket within US valued up to $400. Costco’s has my photo on for those jerks that refuse to show ID. The Freedom gives me 5% and I dont mind signing up for each quarter’s offers.
    Debit cards offer access to thousands and offer so little protection. I havent used a debit card for a debit or charge in at least 10 years, for the ATM, yes only.
    In just over a week there will be no inquiries listed on my credit report which I check daily for $5.50 a month thru USAA.
    Credit Cards = Protection Debit Cards=Fight to get your $ back.
    Do any debit cards extend warranties or offer free car rental car insurance or offer buyers remorse, etc?

  36. Extractor says:

    This article does not belong on Consumerist and should be removed! It would belong on a site more appropriately titled “Screw Me”.

  37. Sardis says:

    Is it wise to depend on a debit card to keep you from living outside your means?

    • richcreamerybutter says:

      I don’t think “depend” is the correct term here. If primarily using a debit card helps me to examine what I’m buying and whether it’s necessary, then I don’t see the problem. As stated previously, I don’t see CC reward points collecting as a desirable hobby. I’ve also been unpleasantly surprised by arbitrary interest rate increases, and at that point any “privilege” I might have as a customer ceases to interest me. Life is too short to micro manage something I don’t even consider necessary for my lifestyle.

      It’s like asking whether people are wise to depend on microwaves to eat home-cooked meals. We all benefit from knowing basic cooking knowledge, but I know that some people can’t handle (for whatever reason) anything beyond boiling an egg. Although I’m one of the 0.0005 of Americans who won’t allow a microwave in my kitchen, I’m all for their use if they can enable someone others to cobble something together in their own home as opposed to completely giving up (microwaves can be useful in other ways, but I’m referring to time-saving defrosting and reheating). I’m certainly not going to scold anyone for lacking the desire to learn how to make a perfect pie crust (which to me is more important than navigating the intricacies of different CCs).

      Some of you need to stop lording your superior financial acumen over those who have found a system that works for them. We all have varying levels of skills in one area or another, and for certain tasks it’s really much easier to hire someone if our needs go beyond rudimentary knowledge.

  38. Ratran says:

    I prefer using my debit to a credit card. Basically my attitude is if I have the money in the bank I can afford it. The added bonus is I don’t have another bill to pay. I have never had fraud on my debit cards, but I have had fraud on my CC. Also, I have had to many instances with credit card company raising rates for no reason, getting hit by a 22 billing cycle Citibank did a few years back and mysterious $1.00 charges.

    I have burned too many times by CC companies. I just use my Visa debit from a little bank I have, no problems.

    • richcreamerybutter says:

      Your CC experiences seem to mirror mine exactly. I do have an emergency CC I use once in a while to keep active, but its primary function is to be available in case of emergency medical/dental bills (which is sadly a constant fear in the US). I do bring it “just in case” for foreign travel, but have honestly never has an issue withdrawing money with my debit card in Europe, South America, or Asia so far.

  39. ben_marko says:

    I like my USAA debit card. They reimburse me up to $15 a month for other banks’ ATM fees.

  40. RogueWarrior65 says:

    It’s really quite simple: Pay off your credit card every month. No exceptions. Know how much money you have at any given time and you’re fine. On the plus side, you get to float the money for a month so you get a tiny bit of interest on it. Then if you have a rewards card you can use the points for things. Generally I avoid tangible goods because the markup is just stupid. I’ll buy airline ticket which is usually a good deal or I can also use the points to pay part of a monthly balance so that’s like cash back. If you don’t have Quicken or some other personal finance tool, get it now. I’ve been using Quicken for 18 years and I’m amazed at what a year-over-year report can tell me. How much have the utility bills gone up in 18 years? How much money have I spent servicing my car? A lot less than buying a new one.

    • gman863 says:

      Many credit card companies offer year-end spending summaries at no charge. While a few cards with high annual fees mail them automatically, almost all offer them through online account access.

  41. Kuri says:

    Meh, people can do what they want for all I care.

    And to those complaining that debit cards are inferior due to lack of protection, well, simple thing is don’t be an idiot with your PIN or card number. Clear your auto-complete histories and keep your information as secure as you can.

  42. Kuri says:

    Well add on that I use a credit union, not a bank. They were eve nice enough to show me and my family how to avoid certain fees.

  43. damageddude says:

    1) You don’t fall into a debt spiral with a credit card if you are careful with your spending each month. Just because you have a $10k credit limit doesn’t mean you have to spend it. Pay your balance each month and you’re gold.

    2) Some credit cards offer cash back.

    3) The one time I wasn’t approved it was because I was on vacation and my spending habits were out of the ordinary. The credit card company wanted to confirm I was the one who had possession of the card. I don’t think they would do that with my debit card.

    And finally, my credit card gets stolen I am out, maybe $50, My debit card goes I can be out a lot more money.

  44. wimom says:

    This has to be a joke, right? Is it April 1st already?

  45. davidc says:

    Terrible Article … really shows the phobia of the consumerist to *responsible* debt. Debt is not bad … lack of debt *is* actually bad (unless your wealthy, in which case why are you reading this?).

    Debit cards are terrible and should only be used where absolutely necessary. They are extremely insecure, ofter no consumer protection, and actually hurt your credit score.

    How do they hurt your credit score? Debit cards actually don’t show up as responsibly handled debt.

    So, if you have $300 of stuff you need to buy and you COULD buy it with a debit card, use the CC instead … you not only get better consumer protection, but wracking up $300 of debt and paying it off actually increases your credit score.

    So yea .. enough of the anti-credit card stuff and start preaching responsible debt … cause unless your independently wealthy, your going to incur debt at some point in your life, and if you have no credit history, that debt will cost you far far more then it needs to.

  46. areaman says:

    You can’t fall into the debt spiral with a debit card.

    That’s not true. On top of the other points made by the above posts, this statement makes it sound like people will stop spending once funds in checking account are used up.

    I had a roommate in college who would use all the money in the checking account and then got consumer loans so he can go to baseball games and buy sports collectables (he got the loans from the bank that made his school or car loans, I forget which).

  47. gman863 says:

    I’m still waiting for the sequel to this article: “Three reasons why sticking money under your mattress beats debit cards.”

  48. MrBuilder says:

    Jim is 100% correct. Those of you who disagree haven’t a clue as to what you are talking about. Learn before you burn!

  49. gpatrick902 says:

    For information.

    For debit card with 2 business days the loss is $50.00
    2 to 60 business days the loss is $500.00
    60 or more business days all the money plus any overdraft.

    Both MasterCard and Visa has extended their zero liability to their debit cards. If you need to claim this. You may need to request a special form from your bank. This does not apply to pin transactions. (However, I think visa interlink may be covered under this but you would have to prove it went through this network).

    Regulation E requires banks to give provisional credit within 10 business day of a written dispute. They have 45 days (90 days international) to investigate including pin transactions.

    Technically it is the 11th business day (even if the bank credits you on the 10th business day, you won’t be able to use tell the 11th business day.)

    Another rule that is sometimes overlooked is this

    for unauthorized transfers involving only your debit card number (not the loss of the card), you are liable only for transfers that occur after 60 days following the mailing of your bank statement containing the unauthorized use and before you report the loss. This info was obtained from.

    http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre04.shtm

    For that rule above it does not matter if your card was used as a pin or a signature transaction.