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I realize this could be somewhat of a controversial subject but let explain why I never use my Debit Card for purchases and always opt for using a Credit Card … and so should you.
Using a debit card for making purchases can feel like you are doing the right thing. You can only use the funds which you have in your bank account after all. No chance chance of overspending and going into debt. However, there are some security concerns you need to be aware of and there are better ways to control your risk while also gaining valuable incentives.
1. Debit Cards do not build credit.
Quite simply debit cards are a means to access your funds and are not reported to credit bureaus. You are not building a credit history with a debit card and are missing out on valuable incentives. By using a credit card and paying the balance you build credit on each and every transaction you make.
2. Debit Cards don’t offer the best fraud protection.
Debit cards do not offer the best protection against fraud and worse, the dispute process is more time consuming and in the meantime you funds are gone. Banks can provide you provisional credit while they do an investigation, but they do not have to do this until 10 days after you notifying them, and there are events in which they will not protect you. With credit cards, there is no worry, your funds are not gone from your bank account and many issuers offer $0 fraud liability.
3. Debit cards do not provide attractive rewards programs like credit cards.
Debit cards generally do not provide any rewards or incentives for using the card. Credit cards on the other hand can offer substantial rewards programs for simply using the card. They can do this since they earn substantial revenue on interest charges. However, if you use your credit card like a debit card and pay your bill then you are the winner. You can gain huge incentives such as cash back, free airline tickets and hotels to name a few. You are the boss here – They are paying you to use their card.
4. Purchase protections for debit cards are inferior to credit cards.
Debit cards don’t provide anywhere near the purchase protections you’ll see with credit cards. With most credit cards you’ll benefit from purchase protections that cover things like travel insurance, card rental insurance, extended warranties to name a few. This varies by card issuer but they are much more robust than anything offered with a debit card.
5. Large deposits may be required when using debit cards.
Whenever you are renting a car or checking into a hotel room, using a debit card is painful experience. Your debit card will be charged a substantial deposit which will be a hold on your balance. The rationale is that your funds are limited to only that which you have in the bank account attached to that debit card. Credit cards on the other hand are not limited to your bank account.
