Do you use debit? Via Shutterstock.
I was stunned that nine out of 10 readers who chatted with me on the BargainBabe.com Facebook page about how many credit cards they had in their wallet HAD NONE! Those nine readers only carry debit cards.
Confession: I have never used a debit card, ever.
I am scared of debit cards! Why do you use debit?
Part of me knows debit cards are secure. I mean, millions of people use debit cards every day. But that fact that a debit card directly removes cash from my account scares me.
- If my debit card got into the wrong hands, what protection do I have if hundreds or thousands of dollars was taken from my account? With a credit card, I’d be protected, especially because I’ve had my cards for years and have built a strong relationship from always paying my balance in full, on time, every month. (Yay, me!)
- A debit card does not build credit history, so I’m not advancing my financial prospects in the long run, not to mention the rewards I earn with my credit card.
- If I debited more money than I had in my bank account, I would either be rejected for a purchase or it would trigger overdraft fees (usually about $35) that I don’t want to pay. Note, it is now easier to opt OUT of overdraft programs, meaning the merchant would simply decline your purchase.
On the other hand, I can think of a few reasons why people use a debit card instead of a credit card (and especially why people avoid store credit cards).
- You got into trouble with credit cards, spending more than you could pay off.
- You opened too many credit cards at once.
- You filed for bankruptcy and so can’t find a bank to give you a credit card with decent interest rates and terms.
- You don’t trust yourself with credit because of the experience of someone close to you or because of horror stories about debt.
Why do you use a debit card? Should I get one?
PS. I looked at reader Joanne’s credit card bill (not her real name) and found ways she could save hundreds of dollars each month. Email me your bill (REDACT ALL SENSITIVE INFO FIRST) at julia at bargainbabe dot com for free advice.
Welcome to Bargain Babe! I’m Mara, and I’m so glad you’re here. I am an obsessive bargain hunter and penny pincher, and I am determined to live a full life without EVER paying full price.
I shop a great deal at ALDI, which doesn’t take credit. That’s really 99% of what I use my debit card for. I also make check deposits at the bank with my debit card. (I’m self-employed.) Other than that, I love my credit cards.
Why? Well, I pay them off every month, so they end up giving me a tiny discount on my purchases. Plus, I have leverage if someone tries to cheat me, and I can see my month’s purchases easily at a glance.
I can also use my debit card in place of a credit card when there’s a place that only takes Visa. I have a Visa, but I haven’t used it in a while, and if I’m going to make only one small purchase that month, it isn’t worth it.
I also shop at Aldi & they do take Discover. I charge all my groceries, gas & medications on Discover for the cash back incentives & the convenience, paying it off each month. Adli does charge a .25 fee each time you use Discover.
I don’t have a debit card either for the same reasons listed in this post.
@Jen Y I thought it was illegal to charge money to use a credit card. Is Discover in a different category – not with the same protections that come with a Visa or Mastercard?
I’ve never broached a Discover card. What are the rewards like?
Do you mean the .25 fee? Actually, from what I understand, some places charge more because of the cost of processing credit cards. They just raise the price instead for everyone rather than give you a choice. That’s why some gas stations will charge less per gallon if you pay cash rather than use a card.
I’ve never heard of it being illegal but maybe that’s in certain states?
Discover pays 5 to 15% back on certain purchases, they pay the most back on medication & gas.
They do have the added security of our other cards but I think they’re more vigilant. If we change our pattern of using it they call us & ask us if we’ve purchased certain items. We monitor our accounts closely online, usually we look at them at least once a week. we’ve been very pleased with their customer service.
We used to be a cash only family, for well over 20 yrs. We didn’t even have a credit card when we bought our house or our 1st car together. The only really foolish financial mistakes we made were bouncing a few checks when we were very young & 1st married. In the past few yrs with family health issues, credit cards have become very convenient for us. We decided to monitor our usage for a while to see how we did & we haven’t gone over budget at all. We diligently save receipts & keep totals on what we charge. I used to do all of our family shopping with cash but when I had major surgery then a few months later a serious accident, in the chaos of it all we began using our CC regularly because we didn’t have time or energy to get cash when we needed something. We were still staying in our budget, paying off our cards each month. We just counted receipts instead of cash. Thankfully we both have never really enjoyed shopping or just wanting something so much we couldn’t wait to save for it. I think our personalities have made budgeting & living debt-free much easier for us than for some.
@Jen Y ~ I think the fraud departments at most, if not all, credit card companies are vigilant as you mentioned. I, also, have been phoned when there was suspicious activity. Turned out that even though my husband and I physically possessed our cards, someone (perhaps a server at a restaurant) had made a copy and was having a good time. We were protected by the company. Also, with many of the credit cards, you can set up online alerts for certain activities, e.g., I am notified whenever a purchase is made without my physical presence (which is infrequent) as when I order something online. Also, I am notified when a charge is made above an amount I specified. I am a credit card fan!
@Jenny @ Frugal Guru Guide Perhaps that’s why I’ve never ventured into the land of debit cards. None of the stores I shop at DON’T take credit cards, so it’s easy for me to charge purchases.
I totally agree with your last point about dusty cards. I once had a Macy’s card that I only used at Macy’s. I shopped there so infrequently, that at least twice I forgot to pay the bill on time. Doh! I got rid of the card because the coupons were not worth the stress of remembering to pay the bill and the ding on my credit score if I forgot.
I wouldn’t make a major purchase with a debit card – like a TV for instance. I use it frequently for drug stores, grocery stores, the vet, ordinary every day shopping. I find a debit card very convenient and you don’t have to carry around a lot of cash.
@Diana ~ Your last sentence about a debit card is exactly how I feel about my credit card.
@Diana But is it any more convenient than a credit card? I almost never carry around cash because I swipe for nearly everything!
Why in the world would you fear a debit card? There is more protection built in for debit cards – you enter in a PIN number for each transaction. Your card can’t be used without it. A debit card allows you to live within your means, as you can’t spend more money than you have. You can monitor your bank balance daily on line. Most banks give rewards points for debit card use.
Totally agree with all your reasons to use a debit card! I use it also regularly!
@Renee You’re right. Debit cards may be more secure because of requiring a PIN. I wonder if I can dig up some statistics on credit card v debit card fraud.
I didn’t know debit cards offer rewards. What rewards do you earn? What do you do with them?
i get 1.5% interest on my checking if i use my debit card 12 times per month. i try to use it 12 times then use my various reward credit cards the rest of the time.
@Chris The 1.5% interest sounds like a good trade off. We definitely use our main credit card more than 12 times per month. When I compared the benefits of a 5% gas rewards card to a 1% everything rewards credit card (http://bargainbabe.com/2013/03/04/does-5-gas-credit-card-earn-more/) the 1% card came out ahead, with some exceptions.
I guess the comparison between a 1% rewards credit card with a 1.5% interest on your balance debit card would come down to how big your balance is.
I have the option of using my debit card as either. I choose to use it as a credit card most of the time. This card has also been stolen and the bank immediately refunded all of the funds that were used in the suspicious transaction. Most banks now have the debit/credit cards tied to incentive rewards so that I earn points/ money when I use the card at certain vendors(starbucks, redbox). Its a win win! I also do have a credit card to build history but you need a good credit mix.
@Rebecca That sounds like the perfect card for you! Honestly, I’m not sure I knew that you could have one card that was debit AND credit. I try to ignore credit and debit card offers via the mail as much as humanly possible. I’m glad the stolen purchases were refunded. Just curious, did the thief use the credit or debit to make the illicit purchases?
Most debit cards have a MasterCard or Visa logo and carry similar protections in case of theft. However, because of this it is virtually always possible to use the card without a PIN by opting to use it as you would a credit card. There are plenty of reasons I can agree with for not using credit cards, but I have no issues at all in dealing with debit cards.
@Amanda Your comment makes me wonder our loyalty to credit or debit has to do with what we saw our parents doing. Because as you and many other readers have pointed out, there are plenty of good and bad reasons to use credit, and to use debit. It really just comes down to what we’re used to.
I never saw my parents use debit cards. It was checks, cash, or credit. Now almost entirely credit.
My debit card was compromised and the bank reimbursed the money to me immediately. You must be vigilant about covering your pin when you have to punch it in somewhere. I used to use my credit card for everything and pay it off at month end but money got tight and then I couldn’t pay it off and it grew and grew. Now we are back on track and I use my debit card so that I don’t ever spend more than I can pay off.
@Robin Good for you for getting on top of your credit card debt and switching to debit! Anything in particular that helped you start spending within your means? I bet other readers are curious, too.
I think it just helps you psychologically to not overspend when you swipe that card where money is coming directly out of your bank account. You know if you have the money right then and there to cover a purchase. When if you’re going to swipe a (credit) card and you’re thinking, “oh, I should have money at the time this is due to pay for it.” You start getting into a dangerous game. When I’m out running errands and I see some impulse item, before I swipe my debit card, I always say to myself: “I didn’t need this 5 minutes ago”, or “I didn’t even know this existed 5 minutes ago”. That usually helps put it in perspective if I NEED to buy it.