Sunday, October 9, 2011

Debit or Credit - Which Card Should You Use?

Debit and credit cards are both convenient ways to pay for things without carrying cash. The beauty of using a debit card is that you are spending your own money in real time rather than borrowing it from your credit card company at what is most likely an exorbitant interest rate. I rarely use my debit card, however, except to withdraw money from my bank. I also NEVER pay interest. Let me explain.

I use my VISA credit card to pay for most everything that I can, including our car and home insurance, vehicle license renewals, etc. I then pay the balance IN FULL and on time each month, avoiding interest and late fees. My account has no annual fee and even earns points based on the amount spent, so each year I actually get a little back. But even if I got nothing, I’d still use my credit rather than my debit for one simple reason:

Fraudulent Charges

That’s right – fraudulent charges. I have two family members who recently dealt with fraudulent charges on their debit cards. Although unrelated, at different banks and months apart, both had charges of several hundred dollars originating in the UK hit their bank accounts. In both cases, the charges were obviously fraud but still took quite a bit of time and effort to resolve. We’re talking several phone calls, personal trips to the bank and paperwork. In the meantime, they were out the money – not a good thing if you have bills to pay.

In contrast, I noticed fraudulent charges on my VISA credit card account a while back. A simple phone call resolved the problem – the charges were immediately reversed and I was out nothing, not even for a minute. I also had the option of taking care of the problem online. I did have to wait for my new card to arrive (and I had my old number memorized – dang!), but that was the only inconvenience.

Should YOU Use Credit Instead of Debit?

So is using a credit instead of a debit card right for everyone? Only if you use your credit card like you would your debit card and spend only what you can pay in full each month. If you don’t have the self-discipline to do so, I guess you'd better stick with the debit card.


  1. I agree 100% percent Crystal. We use the same method. But It did take many years to become disciplined to use our credit card the right way. I also have had fraudulent charges 2-3 times on our credit card , and it was resolved immediately. I was unaware of the process in having fraudulent charges on a debit card. Thanks for sharing. Very helpful info.

  2. Yes, Wendy, using the credit card the right way is the key. Congrats on developing the discipline to do so:)

  3. Not all debit cards are that vulnerable. And "Visa card" is not sysnonymous with "credit card" either.

    Many (most?) banks' debit cards now wear a Visa or MarterCard logo, so "Visa" could just as well refer to a debit card as a credit card. But while that may be picking nits, the real point is that some banks (B of A, for example) offers the same protections for it's Visa debit card holders as it does for credit, including instant refund of fraudulent charges, extended warranty and theft protection on purchases, etc. I once had a fraudulent charge on my BofA Visa debit card and all it took was a simple phone call and I immediately had the funds in question credited back to my account.

    A reason, perhaps, to use credit vs debit now would be the $5 monthly they plan to start charging for devit card purchases.

  4. Good points, homelessonwheels - thanks for reminding me that VISA no longer equals credit, which I know because my debit card also has the VISA logo. So I added clarification in the post.

    As for BofA, I'm glad you had such a smooth experience with them. A couple of weeks ago when my son's BofA debit card number got used fraudulantly, it took him the better part of two days (including phone calls, trips to the branch and filling out a claim form) to set things right and there was no instant refund. In fact, he was concerned that he might be late paying a bill or two due to the absent money.

    And yes, the $5 monthly charge for accessing your own money with a debit card is ridiculous. Do they think people will just pay it? Well, I guess a lot probably will, but I'll be switching banks in hot hurry if mine jumps on that bandwagon.