Debit card advantages and disadvantages explained

What are the pros and cons of using a debit card?

Debit cards provide easy access to your money for daily spending without fees or interest rates. However, debit cards come with minimal fraud protection, don’t build credit or let you borrow money, and you may have difficulties when traveling. Most people use credit cards because they are a more secure means of purchasing.

However, debit cards are still good for daily purchases or withdrawing cash from an ATM.

Luckily for you, I’ll show you the advantages and disadvantages of using a debit card. I’ll show you if using a debit card is safe and secure or if you should use a credit card instead. 

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What are the advantages of having a debit card?

The main advantage of having a debit card is easy access to your money in your checking account. Unlike credit cards, debit cards have no annual fees or interest rates and help you stay out of debt. Most banks will monitor your debit card for suspicious activity and fraudulent charges.

1. Easy access to your own money

Carrying a debit card is like carrying cash more conveniently and safely. Your debit card is like having your bank account right in your pocket. Debit cards are accepted almost everywhere and provide PIN-protected access to your hard-earned money.

You can easily use your debit card to make payments anywhere that card payments are accepted or use it to withdraw cash from your account at an ATM. This is much more convenient and safer than carrying large amounts of money to spend. 

2. No annual fees or interest rates 

A perk of using a debit card is that you don’t have to worry about annual fees or interest rates like you would with a credit card. Your debit card is simply a means of using your own money sitting in your checking account, so there are typically no fees associated.

With a debit card, you don’t need to pay any fees to open or maintain an account. You can easily withdraw funds for free at ATMs or bank branches near you. Using a credit card at an ATM is not advised as you’re actually taking out a small high-interest loan.

In contrast, credit cards usually have annual fees that vary depending on your credit limit. Your balance is subject to interest accrued each month that you carry a balance.

3. Help you stay out of debt

A debit card can be a great tool to help you get or stay out of debt. If you have difficulty with excess spending, try limiting yourself to only doing transactions with your debit card. 

This will force you only to spend money you have because when the money in your checking account is gone, the card will not work. Keep in mind, some banks will charge overdraft fees if you overdraw on your checking account.

Debt is such a slippery slope. It’s effortless to let your spending get out of hand if you primarily buy using credit. If you are using a credit card instead of a debit card to make purchases, you may find yourself overspending more often than not. 

Using a debit card instead of a credit card is an intelligent way to spend on a cash-only basis. If you can’t afford to buy something, you’re not able to buy it. This is better than charging it to a credit card that you will be paying off for months or even years to come. 

4. Good for day to day spending 

Debit cards are perfect for your daily spending. They are accepted almost everywhere, and you can quickly check your account using an app on your phone or from your home computer. Checking your account balance online provides up-to-the-minute information on how much money you have available. 

Whether it’s your coffee on your way to work, your grocery order, or your Target run, debit cards are highly convenient and easy to use. You can carry your available money in a small card that you can tuck in your pocket or wallet with ease. 

What are the disadvantages of having a debit card?

Debit cards have disadvantages such as minimal fraud protection, inability to borrow money or build credit, and you may have issues when traveling. Debit cards are a direct link to your checking account, so you and debit card hackers are limited to the funds within your account.

There are plenty of advantages of using a debit card over cash. However, when it comes to credit cards vs. debit cards, credit cards are almost always preferred.

1. Minimal fraud protection

Most banks offer fraud protection services for their debit card customers, but it is usually not as comprehensive as the protection provided by credit card providers. Your bank will notify you of suspicious activity if they notice any and give you options to identify fraudulent charges, but that is usually where the convenience stops. 

If you have fraud on your debit card, the scammer has spent your actual money, and it is no longer in your bank account. Depending on what the scammer purchased, you may be out hundreds or even thousands of dollars. Some banks will reimburse you, but it may take several weeks for them to investigate and pay you back. 

Credit cards tend to be more protected in terms of fraud. Someone who obtains your credit card information is spending the credit card issuer’s (e.g. Visa or Mastercard) money. The person committing fraud has not found your funds, but a major company’s money.

Also, if you do have fraud issues, they will freeze the card, which means you cannot access any of your money until you get a new card issued. Often you can pick up a new card at a local bank branch, but in more rural areas, you may need to wait to have a new card sent via mail.   

2. Doesn’t help you build credit 

Your credit is impacted only when you have borrowed money through a loan, line of credit, or credit card. You are borrowing an amount of money from a bank or financial institution that has determined you’re worthy of lending to because you seem likely to repay the funds based on their calculations. 

Using a debit card does not help you build your credit. Your debit card is just a means of accessing your own money that you earned and deposited into your checking account. Therefore, it does not have any impact on your credit score. 

If you are looking to build your credit but prefer to use your own money, you may consider a secured credit card from your bank. This is a credit card that you fund yourself with an amount of your own or can be tied to your checking account. 

With a secured credit card, you “borrow” money from yourself and make monthly payments on the balance like you would with a traditional credit card. It’s a nice blend of a debit and credit card that allows you to use your own money and build credit safely.

3. You are limited to spend only what you have

Although debit cards can help you curb your spending and be more aware of your purchases, there is a downside to living on only the money you have in your checking account. It can put you in a difficult situation if you need a large amount of money in an emergency or need to make a big purchase.

If you need to make a big purchase like a furniture set or new appliance, you may not have the total amount readily accessible. Whether you are waiting for a paycheck to clear or you just haven’t saved enough yet, you are limited to only spending the money that you have in your checking account at that time. 

Although you can always create a plan to save up for big purchases or keep an emergency savings account for unexpected expenses, it can be inconvenient to only have a debit card on hand to make purchases. 

4. Travel difficulties

If you travel often, you may want to consider using something other than a debit card as payment. While traveling, most rental car companies and hotels will require a credit card as a security measure if anything happens to the car or hotel room during your trip.

If you don’t have a credit card, they will usually accept a debit card, but they may put a hold on funds in your account for days or weeks. Sometimes the hold can be a few hundred dollars, which may put a damper on your available funds for your vacation. Consider traveling with at least one credit card for this reason.

Banks may also freeze your debit card when traveling if you don’t notify them in advance that you’ll be traveling. The bank’s fraud department only sees a transaction happening in an area you don’t normally make purchases. This can raise a red flag, causing the bank to place a freeze on your debit card.

Summary: Debit card advantages and disadvantages

As you can see, there are many advantages and disadvantages of having a debit card. Personally, everyone should have a debit card, but responsibly use a credit card. The main reason to use a credit card is to build your credit and protect your money against fraud.

The benefits to debit cards include:

  • Easy access to your checking account funds
  • Stay out of debt by spending only the money you have
  • No annual fees or interest
  • Easily check bank account balance online
  • Accepted almost anywhere
  • Some security features (PIN and fraud detection)

The cons of debit cards include:

  • Overdraft fees for overdrawing
  • Direct access to your checking account for hackers
  • Minimal fraud detection or reimbursement
  • No borrowing money
  • Difficulties when traveling (e.g. frozen debit card)
  • Doesn’t build credit

John is the founder of TightFist Finance and an expert in the field of personal finance. John has studied personal finance for over 10 years and has used his knowledge to pay down debt, grow his investment portfolio, and launch a financial based business. He is committed to sharing content related to personal finance based on his experience in his career, investing, and path towards reaching financial independence.