We’ve embraced debit cards as part of our daily lives at this point, and it’s hard not to with all the advantages they offer.
However, they also create a horrible habit, one that can be devastating for your finances if you let it spiral out of control.
When you use a standard credit card, you’re much more likely to accumulate debt, but there are still reasons to consider using it over a debit card.
Even though using a debit card practically ensures you won’t spend more money than you may actually have, it can also mean that your losses will be that much greater if you become a victim of fraud.
Scams are everywhere nowadays, and running into one online isn’t uncommon, so you’d be better off spending money that wasn’t yours from the get-go if you’re already risking losing it.
Exposure to fraud
Many people assume that debit cards have the same anti-fraud protection that credit cards do, but that’s simply not the case.
Most credit cards have a zero fraud liability cause, making you safe from any damages caused to the bank by fraudulent action, but this doesn’t necessarily apply to the bank’s debit card program.
Unlike a credit card, if you’ve lost your debit card, someone could find it and wipe it clean, leaving you without a dollar to your name, and you won’t even get the chance to report it most of the time.
With a credit card, however, it’s an entirely different story, and the money that gets spent immediately gets returned if it’s proven that you weren’t the one using it, and even if it doesn’t, you won’t be exposed to the same amount of risk.
Based on how long you take to report the fraud, your amount of liability will vary, and if you, for example, report it within two days, you’ll only be liable for $50.
The rewards you’re missing out on
Aside from the increased risk of fraud, using a debit card instead of a credit card also means you’re giving up on all the rewards your bank offers when you’re shopping online.
There are thousands of cash-back programs out there, and travel rewards too, which you can usually claim only if you’ve purchased certain items or a certain amount with your card.
If you’re fairly used to online shopping, these rewards will pile on incredibly fast, and you could spend even more on the merch you want without having to worry too much about accumulating extra debt.
A rewards or travel card will usually net you 1-3% of your spending back, but if you apply for a cashback program or an airline portal, you could possibly double up on the rewards you reap.
At times, these portals may also allow debit cards, but then you’d be able to earn only airline miles and cash back, without any access to all the additional rewards.
Sign-up bonuses are voided
Unlike credit cards, shopping online with a debit card means you could potentially be skipping out on a giant sign-up bonus.
In fact, many rewards-based credit cards offer their users up to a $500 bonus when they reach a certain spending threshold, although this only applies if they’ve spent a set amount of money in a predetermined amount of time.
One of the more common misconceptions is that sign-up bonuses require you to pay a yearly fee, but this is anything but true.
In reality, you can find dozens of credit cards that offer bonuses, rewards, and much more without forcing you into paying an annual fee.
Consumer protections won’t apply to you
Credit already has a lot going for it when compared to debit cards, but the fact that credit cards have much better consumer protection may just be the selling point.
With this, you can be protected from contingencies like flight cancellations in the case of cancellation/interruption insurance or even accidents that may happen on your trip through travel accident insurance.
There’s a variety of things that may happen which can ruin your day, and you’ll want to be prepared for them at all times, and debit cards simply don’t offer you the advantages you need to overcome them.
Apart from this, credit cards also give you access to extended warranties and guaranteed returns if an item you’ve bought doesn’t suit you.
You may also find that if you’re using a debit card, you won’t be able to qualify for the majority of these options.
You’re not improving your credit
Finally, we have the ever-important credit score, and if you’ve grown accustomed to using your debit card, chances are you’ve never contributed to your credit history.
When using a credit card though, all of your purchases are reported to the 3 credit reporting agencies, and they’re determining how reliable of a borrower you are.
If you make regular payments on your card, the credit agencies will be able to see your creditworthiness, ultimately increasing your credit score after years of commitment.
Naturally, using a debit card can’t possibly hurt your debit score, but it also doesn’t help improve it, and you don’t want to have this pop up as an issue later down the line