6 Reasons to NOT Use Your Debit Card
Debit cards are popular for lots of reasons: they’re convenient, they usually don’t have fees, they discourage overspending, and they don’t charge interest. But they also have more than a few drawbacks. At BookWerksTM professional bookkeeping service, we suggest clients use debit cards sparingly—primarily as a way to withdrawal money from ATMs. Here are a few reasons we prefer credit cards to debit cards.
1. Limited Fraud Protection
Debit cards don’t offer much protection from fraud. With credit cards, liability for fraudulent transactions is often limited, but debit card users can find themselves responsible for charges they didn’t make. If someone gains access to your debit card information and makes unauthorized purchases, you may be held liable for the losses until the issue is resolved, which could take both time and effort.
2. Direct Access to Your Bank Account
You may not have realized that when you use your debit card, you are giving merchants direct access to your bank account. You run the risk of your card information falling into the hands of identity thieves or scammers who are eager to run up high tabs on your card. With credit cards, you at least have an extra layer of protection, because you are not using your own money directly.
3. Limited Dispute Resolution
Resolving disputes with merchants can be more challenging with a debit card. If you have an issue with a purchase made from your debit card—for example, if you bought a defective product or the merchant overcharged you—resolving the situation can be maddeningly complex and time-consuming. By using a credit card instead, you will typically not pay until the problem is resolved (depending on the card).
4. Impact on Your Credit Score
Want to build your credit? You don’t build or improve your credit score when buying things with your debit card like you do when you use a credit card*. A good credit score is important if you want to:
- Take out a loan
- Buy a home
- Get friendly interest rates on major purchases like cars or houses
Using credit cards responsibly (*like paying off your balance every month before accruing interest) can show your creditworthiness and build a positive credit history.
5. Overdraft Fees
A big debit card hazard is accidentally overdrawing your account. If you make a purchase that empties your account, you may find yourself facing ugly overdraft fees. These can quickly add up, further straining your finances. Credit cards usually have predefined limits. Going over them often leads to penalties, but they may not be as severe as overdraft fees.
6. Limited Rewards and Perks
A debit card simply utilizes the balance in your bank account to pay for goods and services. But most credit cards have rewards programs that let you earn cash back, travel points or other goodies. With debit cards, you miss out on these benefits, which can build up over time and help you get more for your money. Hello free trip to Cancun!
Go With The Credit Card
To avoid all these risks, our professional bookkeepers recommend not using a debit card for anything, unless you are taking money out from an ATM. If you have to use a debit card, look back over your purchases often, and consider utilizing credit cards instead. If credit cards are used properly and responsibly, they can provide more protection and valuable perks. You may have to exercise a bit more discipline in your spending, but the added security and benefits will be worth it.