Debit vs Credit Card – 5 Reasons Why Using Your Debit Card Is Stupid

Debit Cards vs Credit Cards, which side are you on?  I am personally on “team credit card” and I’ll provide 5 reasons why.  But first, let’s learn why so many people are afraid of credit cards.

From an early age, we’re taught credit cards are evil and we should avoid them at all cost.  Where did this come from?

Credit cards started to become mainstream in the 1970s and got their bad reputation when American’s started spending more than what they earned.  This spending habit, (spending more than what you earned) caused many Americans to go in debt.

Instead of addressing the poor spending habits as a problem, many blamed the credit cards and that’s how they got their bad reputation.  Unfortunately, this poor spending habit hasn’t stopped.  According to Value Penguin, 41% of households in the United States have credit card debt and the average credit card debt per household is $5,700.

However, if you are reading this blog, I am assuming you are not in that 41% or you are striving to get out of it!

If you are able to pro-actively manage your credit cards then credit cards create opportunity.  Using credit cards correctly takes discipline and when discipline is in place, credit cards should be the type of payment used instead of a debit card or cash.

Ok it’s time to look at the debit card vs credit card comparison, here are 5 reasons why using a debit card is stupid.

Note: This post is for educational purposes only, please speak with a financial advisor for any financial advice! Read full disclosure policy.

Debit Card vs Credit Card – 5 Reasons Why Using a Debit Card is Stupid

If friends and family use debit cards or cash when making a purchase, I often ask why?

Often it’s an answer like “I don’t know, why not, I don’t like credit cards, I’m scared to use anything else, debit cards are simple”, and many more.

Taylor and I only use our debit card for two things and two things only.

  1. To withdraw cash from an ATM
  2. To make a payment on Venmo (or other money exchange that charges a fee if you use a credit card).

Instead, we use credit cards to purchase everything we buy.  We avoid using a debit card or cash whenever possible.  Here are 5 reasons why I do not use a debit card and prefer using a credit card every time.

1. Fraud Protection on Debit Cards Suck!

When comparing fraud protection between debit cards and credit cards, it’s doesn’t come close.  The consumer financial protection laws greatly outweigh in favor of credit cards use over debit cards use.

In fact, the main difference between debit cards and credit cards if you report unauthorized users making purchases on your behalf is the maximum amount you’re liable for.

If you’re using a:

  • Debit Card – You may be liable for the entire unauthorized purchase
    • If you report the unauthorized transaction within 48 hours of the time the transaction posted the maximum amount you’re liable for $50.
    • If you report the unauthorized transaction after 48 hours but within 60 days, you may be liable for up to $500.
    • After 60 days passed from the date of the unauthorized transaction and you didn’t report it you liable for the entire purchase or lost money.
  • Credit – The maximum amount you’re liable for on a credit card is $50, period.

Consumer protection laws greatly benefit credit card users over debit card users, which brings us to the next reason why using a debit card is stupid.

Debit Cards – 0 vs Credit Cards – 1

2. Takes up to 14 days to get your money back from unauthorized purchases

In addition to weak fraud protection with debit cards compared to credit cards, you’re also at a significant disadvantage with the amount of time it takes to get your money back.

If someone got a hold of your debit card and made an unauthorized purchase, the money used to make that purchase is temporarily gone.  Whether the individual withdrew money from your account through an ATM or made several purchases that wiped out your checking out, you could be temporary without any money.

In the unfortunate event that you aren’t aware of the unauthorized user’s activity, you could find yourself with a checking out that has a zero balance!

This is one of the main reasons I suggest opening a separate saving account for an emergency fund to protect yourself and your money.

No matter when you report the unauthorized transaction, the bank has 14 days to refund the money. 

Taking our learnings from the first reason above, we know if you report an unauthorized transaction within 48 hours you’re liable up to $50 of the lost funds.  However, you have a good chance of getting your money back.  If you wait until after 48 hours, you’re liable for $500, and if you don’t see it or report it over 60 days you’re liable for everything, aka you’re screwed.

However, the real stinker here is if we do notice it right away, banks have up to 14 days to investigate it before they provide you the funds!  Yes, that means you may have to wait 14 days to get your money back!

What if the unauthorized user took all your money?  Well, you’re screwed for those 14 days…

Worst if the bank mails you a letter requesting additional information, it buys the bank additional time for them to refund you the money.

Now comparing this to a credit card…

If the unauthorized user got a hold of your credit card and made purchases with the card, you’re not liable for this money.  Especially because it’s not even yours, it’s the credit card companies.  Remember, when you use a credit card, you are borrowing money from the credit card company.  The credit card company bills you the total amount of purchases for a given statement and expects you to pay the consolidated bill each month.

Since you borrow the credit card company’s money, you’re immediately protected.  If an unauthorized transaction occurs on your credit card, call the credit company as soon as possible.  Remember the maximum you’re liable for is $50, which is unlikely if you report the fraudulent activity as quickly as possible.

Once you notify the credit card company, they will remove the unauthorized purchase from your account or freeze it immediately.  They investigate the unauthorized charge similar to a bank, but you are not charged for the purchase or any additional interest.

Debit Cards – 0 vs Credit Cards – 2

3. Cannot build credit and increase your credit score with a debit card

If you’re trying to build your credit score and you use your debit card you’re hurting yourself.  You cannot build your credit score with a debit card.

If you’re interested in building credit but nervous about using a credit card or think you do not have the discipline to proactively manage a credit card, then consider applying for a secured credit card.  A secured credit card is a mix between a debit card and a credit card that helps you build your credit.

In short, a secured credit card is secured by your bank account, which restricts you from spending more than you earn.  It’s a great tool if you cannot get approved for a credit card or if you want to ease into managing credit.

If you use the top 10 credit card best practices then you know to pro-actively managing your credit and should not have debt.  Instead, you strategically use a credit card to continue building or maintaining a healthy credit score.

Debit Cards – 0 vs Credit Cards – 3

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Note: This post contains some affiliate links for your convenience (which means if you make a apply for a credit card after clicking a link I will earn a small commission but it won’t cost you a penny more)! Read my full disclosure policy.

4. No Cashback, Reward Points, and Miles! – My favorite reason why using a debit card is stupid!

There are so many credit cards that offer cash back, reward points, and miles when making a purchase.  Yet, there are very few debit cards that offer similar perks.  If you find a debit card offering cashback or other perks, they are usually capped at a total value of $200 per year and not worthwhile.

Credit cards, on the other hand, offer endless opportunities to accumulate cashback and points or miles.  My first credit card was the Discover It card, where I received 5% cash back on category purchases.  Category purchase varies from gas, home improvement, restaurants, online purchasing, and others each quarter of the year.

If I spent $200 in gas I received $10 back through cash back, simply by using the credit card.  By the end of my first year using my credit cards, I accumulated well over $250 in cash back which I used to help pay off my student loans.  That’s easy money earned from simply using a credit card instead of a debit card or cash.

Become a Travel Expert and Travel for Free

A few years later, I discovered the world of travel hacking and travel reward credit cards.  I submerged myself in the “points and miles world” and became an expert.  Now I strategically have over 12-15 credit cards and redeem thousands of dollars each year on travel using credit card reward points and miles.

Over the last 4 years, I have saved us over $65,000 on travel/vacations using the point and mile accumulation strategy.  I teach this strategy in my online course, Travel Hacking Secrets.

In Travel Hacking Secrets, I go into much more details on the following:

  • How to accumulate millions of points and miles without ever flying or staying at hotels
  • How to get the absolute best redemptions using points and miles
  • Airline alliances and what airlines fly where
  • Access to airport lounges
  • How to get TSA Pre-check or Global Entry
  • Hotel partners and hotel elite status
  • How Taylor and I got a $12,768 business class flight to Thailand for only $33 and how you can too.
  • The myths of credit cards and what you really need to know
  • And so much more

The good news: Anyone can become a travel hacker if they leverage our top 10 credit card best practices and learn the strategies taught in Travel Hacking Secrets.

NOTE: Please be aware, I am not telling you it’s ok to use your credit card for the sole purpose of cash back or points/miles.  If you cannot afford it, do not buy it!  Simply treat your credit card as your debit card and stay conscious of how much you can truly afford.

Debit Cards – 0 vs Credit Cards – 4

5. No additional perks aside from cash back, reward points, and miles!

If you made it this far, I think you see my stance on using debit cards and why I think they are stupid.

Here’s one last reason why I think you shouldn’t use a debit card…

Along with cash back, reward points and miles that come along with credit cards, they also come along with tremendous perks.  Most debit cards do not come with any additional perks and in fact put you at more risk than a credit card (see reason #1 and reason #2 for why using your debit card is stupid).

Examples of Credit Card Perks

Some perks that come with a credit card are things like, no foreign transaction fees, rental car insurance, trip delay or cancellation insurance, purchase protection, free hotel night certificates, elite status, access to airport lounges, membership clubs, and many more.

For example, I use a card like the Hilton Aspire American Express credit card to obtain elite status with Hilton Hotels and receive room upgrades.  I can then use that elite status to get more perks like high-speed internet, airline credits and more.

You might be thinking well some of those credit cards carry annual fees, which is true.  However, if you understand the perks, cashback, miles, and points that are available to you, you’re able to net a positive return utilizing the credit card and paying the annual fee.

For example, I have the Marriott Bonvoy card, which has a $95 annual fee.  However, each anniversary I receive a free night award certificate at any Marriott Hotel (worth 35,000 points or less).  Usually, the nightly cost of the hotel room greatly outweighs the annual fee giving you a discounted price of $95!  Taylor and I spend an average of 15-20 nights in a hotel room each year so we know we will absolutely utilize this perk each year.

Unfortunately, this card is no longer available to the public, but American Express does offer a the Marriott Bonvoy Brilliant card, which has a higher annual fee but a better free night award certificate.

Debit Cards – 0 vs Credit Cards – 5

Conclusion – Debit Card vs Credit Card

I want to reiterate, with a lack of discipline, credit limits are a financial disaster.  If you lack discipline, do not use a credit card since you can do some serious damage to your credit score.

For example, if you get a credit card with a $1,000 limit and you go right to the store to buy yourself a new computer that’s worth $999 and you only have $500 in your bank account, you’re in trouble.  If you’re planning on only making the minimum payment on your credit card over the next 6 months, then this approach is not for you.

In fact, if that is you, please avoid credit cards at all costs.  Remember when you use your credit card you are borrowing money and you NEED discipline.

Bottom Line: If you have Discipline use a credit card

Stay disciplined with your finances and treat your credit card like a debit card and you will not have a problem. What do I mean by treating your credit card like a debit card? Well, when you receive your credit limit do not think you have an additional source of money.

If you have a limit of $10,000 that doesn’t mean you should go buy $10,000 worth of goods for the hell of it.  If you only have $2,000 in your checking account, you should not spend more than $2,000.

Let me know what you think of the debit vs credit card debate and the 5 reasons why I think using a debit card is stupid.

About The Author

Kevin Mathers

A washed-up hockey player, surfer, and husband currently working towards financial freedom and showing you how we do it as a couple. I started this blog initially as a personal finance blog but after getting married, Taylor (my wife and best friend) and I decided to switch gears into the travel world sharing our experiences with you along the way.

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