Credit cards and debit cards both have their advantages, but one must emerge victorious in an all-out battle of financial usefulness and security. Which will it be? Here are your best arguments.
Note: This post summarizes what you said, not necessarily what we think on the subject (although I offered a few comments myself in this one). Please keep that in mind as you read, and check out the original discussion if you want to see every argument.
Debit Cards Are Simpler
Some people prefer the simplicity of debit cards: you buy something and your money goes away. NYorker123 elaborates:
I have a debit card (with no fees or anything) and hope I never have to get a credit card. With a debit card, I pay exactly what the item is worth and no more, since there is no interest. I don’t have to jump through any hoops for “miles” or “points” or any other nonsense. What it boils down to is that debit card is the simple choice for people that want to spend the money they have without actually carrying any around or any of the conditions associated with a credit card.
While all true, many contested this point for reasons we’ll get to later: all the problems with credit cards are the result of user error. If you don’t want to pay interest, pay your balance monthly. You can even do it automatically through your checking account so it sort of works like a debit card. That’s just one reason, but there are many more we’ll discuss shortly. Still, as reader SKiTz points out, it doesn’t matter if you struggle to manage your money:
How do you die hard credit card folks manage your spending? Every time I try the whole “I’ll use credit for my everyday purchases and earn points” strategy I end up spending more than I normally would.
I find it much easier to budget when I’m using my debit card. Expenses come out in small, bite sized amounts instead of getting a huge bill every month, and I like the control of knowing EXACTLY how much money I actually HAVE. I like being able to look at my checking account balance and say, “Hmmm…it’s starting to get on the low side. I should probably slow down on the spending.”
In response, littleb33 notes that Mint.com can help curb spending because you can see exactly what you’re doing. Personally, I find my credit card easy to manage because I check the balance and activity almost daily. I know how much I’m spending because every transaction shows up immediately and if I ever hit my credit limit I know I’ve spent too much for the month. This rarely happens because I’m paying attention, but if you only spend from the card and keep a finite amount of cash available for the month you can definitely manage your money through credit-based means. It just takes some personal adjustments
Credit Cards Build Credit, Provide More Perks, and Offer Greater Security
Naturally, credit cards help you build credit. If you have a good credit score, you can get more credit and better credit cards! That seems almost like a vicious cycle of debt, but there are other benefits like home and car loans. Few people make either of those purchases with cash—especially homes—and you need proof you can pay your bills in order for banks to trust you with large amounts of their money. That’s where credit comes in. Credit, by nature, also offers greater security against fraud. Reader johnny_ryall explains:
As others have said, a steady and great way to build a credit score – so long as you can remember to pay your bill on time, every time. It gives perks that aren’t available to Debit card users, or at higher percentages than those Debit options with perks. Security and fraud protection keep your actual checking/savings account out of harms way. Some cards also offer extra protection/extended warranties for bigger purchases beyond service/mfg guarantees.
I’ve been pretty religious about paying off my card every paycheck, instead of once a month, for a few reasons: 2 payments a month, so if i do forget to make one, odds are I’ve already made a payment and won’t be dinged for being late – also, it’s easier on the eyes to pay ~$ 500 every couple weeks instead of a grand or more once a month.
I will say, when I finally got serious about managing my spending, Debit was the way to go, so I never spent more than I had. Once that was under control, I switched to the CC and never looked back.
Personally, I did the same thing. I had spending problems when I was younger and racked up a lot of debt. I paid it off, got my credit score to a good place, and then switched to a low limit credit card to train myself. Now I have a much higher limit and I can manage my spending responsibly. If I didn’t take off the training wheels of debit, I’d have never been able to build up my credit to where it is now.
Debit Cards Have No Minimum Charges and Are Accepted in More Locations
Debit cards do have one surefire, very enticing benefit over credit cards: you can use them in more places and and there are no minimum charges allowed. Reader ukanthandlethetruth explains:
While I prefer Credit over Debit 95% of the time. No one has said a real benefit of Debit over Credit. No allowed minimum charges. Go to a bar and get a beer and put it on Debit (assuming they allow debit). Credit cards can have a minimum charge according to the Durbin Amendment to the Dodd–Frank Wall Street Reform and Consumer Protection Act.
Some gas stations only allow debit, or provide discounts for debit card users. Some stores only allow debit cards or cash (e.g. CostCo, although they also accept American Express). While you can usually pay with your credit card, you’re more likely to find a place that accepts debit.
Flaws With Credit Cards Are Due to User Error
Credit cards have a lot of perceived downsides by those who struggle to budget when using one. Reader justagigilo85 argues this is more an issue of user error than anything:
All the “flaws” with credit cards I’ve read are due to user error:
- You can’t control your spending and go over your limit
- You don’t have a budget (or have one and don’t adhere to it)
- You don’t pay your balance in full and rack up interest
- You signed up for a card with an annual fee.
Some call them “hoops” you have to jump to. I call them comment sense. If you can manage staying on budget with a debit card, you can stay on budget with a credit card and not have it cost you anything.
And there is no short term downside to having your credit card stolen as charges are immediately reversed… as opposed to having your checking account drained while you’re left working with the bank what happened.
With great credit comes great responsibility. Debit has more limitations so you have less room to mess up. Credit provides a little more opportunity but you have to be able to handle it.
Overall, credit tends to provide many more tangible benefits than debit but you can’t rule out either. Most of us don’t want to pay cash at a gas station or pay extra for using a credit card. Sometimes debit is necessary. But for those who can manage their money just fine with credit, it’s clearly the more popular choice here. Debit just happens to be more of a necessity whereas credit is an upgrade.