Last week, I wrote about some downsides to using debit cards. This week, I see a bunch of (completely unrelated) posts from other bloggers who are jumping on the “Debit Cards suck” bandwagon. Some of their reasoning makes sense, some of it is a little inaccurate, and some is just funny. I’m not going to name names here, some of these people have earned my respect on many topics, and I don’t see that my disagreement with their analysis of debit cards is worth blasting them publicly. So, if you wrote a post about the downside of debit cards in the last week, I’m probably not talking about you specifically.

Debit cards aren’t all bad. As I said before, I live off my debit card. I prefer cash as a method of making me decide what is really important to me. I like the fact that I can’t go wild and destroy years of hard work.

Some of the arguments I’ve heard include the notion of “double charging” that some PF’ers swear happens to them, the lack of a rewards program with debit cards, and the perceived lack of security that they believe debit cards have vs. traditional credit cards.

Let’s start with the “double charging”. This is just BS. What happens is this: You go to a gas station, for example, and swipe your card to get gas. The machine doesn’t know how much gas you are going to get, the attendant doesn’t know, and in most cases, you don’t know. So the gas station submits an authorization hold on the card. For most places, it’s only a dollar, but depending on the place you go, it may be higher. I’ve heard that some places hold $100.00. The hold is good for a couple days (the time needed to process the correct transaction), and then it goes away. My advice there is to not go to the places that hold $100.00, and to make sure you have enough money in your account before you go spending. Incidentally, the same thing occurs with credit cards, but instead of a debit hold, a credit hold goes on your card.

Some people love them their rewards. They believe that it’s better to use a credit card that offers rewards points, feeling that credit card companies do this for “free”. They think they are getting something over on the credit card companies if they pay off their balance in full when the bill comes in. We all know better. Companies just don’t do things for free. These people are really gambling that everything happens just right. All it takes is one time for a payment to get lost in the mail, and their “free” points wind up costing a lot of money in interest cards.

The most laughable point I’ve heard yet is the issue of security. People cling to this hope of $50.00 liability like that’s some sort of good thing. I have credit cards that say I’m only liable for $50.00 in transactions if my card is lost or stolen. My question is, why should I have to pay $50.00? My banks have an answer: You don’t. Every institution I deal with has a zero liability. My information gets compromised in any way, and I get my money back. Usually, all I have to do is make a phone call, but in the worst case scenario, all I have to do is get a police report (not hard), and sign a form saying I’m disputing the transaction. It’s easier to do this as long as I’m dealing with my money. With a credit card, it’s not my money. It’s the credit card company’s money. So, as a gesture of “good will”, they “limit” my liability to $50.00. When I get the bill, I’m pretty pissed at having to pay $50.00 in charges that aren’t mine, so I don’t make the payment while I appeal to their management. Their management takes their time to respond, meanwhile my $50.00 is generating interest that I’ll eventually have to pay. There’s more to the story. If my debit card is lost or stolen, my banks have hard-coded limits on the amount that can be authorized. I’m limited to the amount they can take from me. I’ll get all the money back, but this way I still have money left over. With a credit card, someone can max out my card. I keep a couple of credit cards for emergency situations, but they don’t do any good if they are maxed out pending an investigation by a credit card company.

Some people also talk about the advantage of paying off their credit card balances each month, and keeping what would be available in a checking account in a high-yield savings account. In their minds, they are not only not paying interest, but they are making a higher rate of return for the 20 or so days that they aren’t using their money. Okay, I guess this works, but it is a pain in the butt. I also don’t like the gamble of that ONE screwed up payment.

Look, we all know there are more important things in life than money. When you play these games with money, you are spending a lot of time and effort on something that really doesn’t matter. Sure, if everything goes right I might make a few dollars, but is it worth it? At the end of the day, it’s your call what currency to use. Make your decision based on personal preferences. Don’t look to me or anybody else to make your decisions for you. Obviously, for me, the ranking is cash, debit, and then credit. For others, it’s cash or nothing, and for others it may be something else. It all boils down to personal responsibility, and a tolerance for risk. How sure are you that nothing will go wrong?

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Comments
  1. Yeah, unless you are talking about a sizeable amount of money you are probably spinning some wheels. A friend recently “cashed” in his airline miles and received a $900 credit on his card. That was probably 3 years worth of effort and hey nine hundred bucks is still nine hundred.

  2. Wil says:

    Okay,

    I can see that, but saving $25.00 a month can be a lot less hassle. Most teenagers could recycle cans and bottles and make a good chunk of that.

    Most young adults could skip buying lunch one time a week.

    Most of us could walk or ride a bike to work a couple of times a week.

    My point here is $900.00 in 3 years only sounds like a lot of money when you bring it out to three years of effort. I still wonder how much your friend would have thought of his airline miles if one payment arrived late and he had to pay finance charges, possibly over-limit fees, possibly late fees, etc.

    I appreciate that these programs exist, and when I actually use my credit cards, I take advantage of them, but I think most teenagers and young adults probably don’t want to expend the effort needed to make these programs pay off for them.

    Thanks for reading and posting. I enjoy hearing arguments, even if I don’t agree.

  3. […] about DIFFERENCES IN BANKS AND CREDIT UNIONS.  She, like many others, wasn’t aware of the BENEFITS OF DEBIT CARDS, or the DOWNSIDE OF USING DEBIT.  Okay, I could show off and put links to almost everything we […]

  4. […] Open a Checking Account: Your teen probably has a savings account but it’s good to get him a checking account so he can deposit and use his hard-earned cash. You can get your name put on the account so that you can oversee his transactions. Let him get a debit card and teach him to balance his account regularly. Even if he messes up and gets an overdraft charge, it’s better to do it now than to rack up thousands in credit card charges and fees as an adult. (Note from Wil:  I talk about this very topice HERE!) […]

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