Why you should never use your debit card

Why should you never use your debit card?

You should never use your debit card due to minimal fraud protection, ease of overspending, and lack of credit building. Debit cards access your money from your account, whereas credit borrows money from lenders. Therefore, any money stolen is your responsibility.

Debit cards are a convenient way to pay for things without having to carry around cash or checkbooks. However, some schools of thought say you should never – or at least, very rarely – use a debit card to make a purchase.

In this article, learn when and where it is okay to use your debit card for purchases. I’ll show you why you may want to avoid using this piece of plastic (almost) altogether to minimize several different risks.

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Why Shouldn’t I Use a Debit Card?

You shouldn’t use a debit card if you’re concerned about consumer protections, reigning in your spending, building your credit history, or avoiding hefty pre-authorizations that hold your cash hostage for days on end.

Unlike credit cards which use a loan or a line of credit to fund purchases, debit cards are linked directly to the cash in your checking account.

This means that when you go to make a purchase, and the merchant swipes your card, that cash is gone. While some banks do offer protection for fraudulent charges, what will you do in the meantime while they sort out what was fraud and what wasn’t? 

You’ll be out of luck and out of money.

Is It Better to Use a Debit Card or Credit Card?

In most cases, it is better to use a credit card. Credit cards have better protection against fraud and help you build credit. Debit cards are equivalent to using cash, but it’s linked to your checking account.

Both credit cards and debit cards make it easy to overspend. Paying with cash registers as pain to our brain, but swiping a card doesn’t.

But credit cards offer more benefits than debit cards. Therefore, if you’re set on spending via one card or the other, here’s why you should choose credit.

Disadvantages of Using a Debit Card

Debit card spending doesn’t have the same consumer protections as credit cards.

For example, according to the Federal Trade Commission, you will not be responsible for fraudulent charges made on your debit card after you report the card lost or stolen. But if you wait, or unfortunately don’t notice that these charges are being made for quite some time, you could be on the hook depending on how quickly you report the issue.

If you report the issue within two days, you’ll be on the hook for at least $50. You could be liable for up to $500 in charges for waiting longer or don’t notice until after two days have passed. If it takes you longer than 60 days to report a fraudulent transaction, you’re not covered. You have to take the loss.

In addition, debit cards won’t help you build your credit history. You’re not proving that you can responsibly spend and manage a line of credit when you’re only spending your own cash.

Were you renting a car or checking into a hotel? If you want access to the cash in your account, don’t use a debit card for incidentals on your account. 

The hotel or rental company will hold and freeze upwards of hundreds of dollars of money in your checking account. Typically, this is in case you damage their property, and these holds can last up to 7 days.

That’s 7 days of not being able to access your money to use if you need it.

Advantages of Using a Credit Card

Credit cards, meanwhile, cannot hold you responsible for unauthorized charges under federal law if your credit card number is stolen. If you lose your physical credit card or it is stolen, you can’t be held liable for anything more than $50.

Credit card companies also report consumer information to the three major credit reporting bureaus, including TransUnion, Experian, and Equifax.

This means that you’re building your credit as you responsibly spend and pay back the line of credit given to you by your credit card company. This helps you improve your credit score and history, making you eligible for better loan rates and bigger lines of credit in the future.

Lastly, credit cards offer protection on some bigger purchases, such as appliances and electronics.

Where the appliance or electronic company might offer you a warranty with your purchase, many credit card companies extend that warranty even longer. You’ll get a replacement or a fix, free of charge, if something goes wrong with that purchase. 

When Should I Not Use a Debit Card?

Some experts argue that consumers should never use a debit card except when they need to withdraw cash from an ATM. While a debit card works like cash, it is just as easy to overspend on a debit card as it is on a credit card, and overspending can lead to big overdraft fees.

But there are other, more specific instances where you should never use a debit card and for different reasons.

1. Gas Stations

Gas stations are hot spots for thieves who install credit card skimmers on gas pumps to steal your card number and PIN code from the magnetic strip or chip.

While these skimmers can steal credit and debit card information, a debit card gives the thief immediate access to your cash and you may not notice for days or even months.

On a credit card, you’ll be protected if fraudulent charges are made, no matter when you notice the thieves have gained access.

2. Restaurants

Handing over your debit card to a restaurant employee is risky business. If it gets into the hands of a disgruntled or dishonest server, they could steal all the information off your debit card to turn around and use it to make purchases online. If you don’t notice, you’re on the hook.

Or, they could fill in an overly generous tip. That money is withdrawn from your checking account immediately. But with a credit card, you have more time to call your bank and fight the charge. And, your cash won’t immediately be missing from your account.

3. Online Purchases

Online retailers are notorious targets for digital theft. But having your information stolen over the internet isn’t the only reason to put down your debit card for that online purchase.

If the retailer charges you, but your item is lost in the mail, arrives damaged, or is defective, a credit card company can help you fight the charge. Your debit card offers little to no protection in these instances.

4. Hotels and Rental Car Companies

As mentioned above, hotels, motels, and rental car companies will place a freeze on funds in your checking account until you either check out of the hotel, return the car, or perhaps even days after you do either of these things. If you need that money for your vacation, you won’t be able to access it.

Meanwhile, a credit card may also have a hold placed on funds, but it’s not your own cash that’s being held up.

5. Other Travel

Flights and other travel expenses can earn you rewards if you pay using a credit card, meaning you’ll get cashback, airline miles, or points to use on other items simply by spending what you were going to spend anyway.

In addition, credit card companies can offer protection for flight cancellations, changes, or other unforeseen circumstances that debit cards can’t.

Final Thoughts

As you can see, there are very few instances where a debit card is a better option than using a credit card. This is why you should never use your debit card except to withdraw cash for spending.

While a debit card is a convenient, fee-free, and interest-free way to spend your money, you’ll lose many of the protections that credit cards can offer you, which could end up costing you more in the long run.


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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.