The ability to still use your debit card for free appears to be safe for now, but perhaps this most recent debit card fee “scare” by the major banks is just enough reason for me to try to convince you that credit cards are the way to go; if you have self-control. Here goes…
• Debit card purchases are an immediate withdrawal of funds. Using a credit card (if you pay it off monthly) amounts to an interest free 30-day loan; which adds up over time.
• Most banks offer fraud protection for debit and credit card transactions, but federal law caps debit users’ obligation at $500 and credit users’ obligation at only $50. The bank’s policies could change any time.
• Recovering money is much more difficult on a debit transaction than a credit transaction. If your card is stolen and the thief uses your card, if you have already paid for merchandise that is never delivered or delivered damaged, or if an amount is in dispute, the money has already disappeared from your account if you used a debit card. Who knows what lengths you will have to go through to get that money back! If you had used your credit card, the money is still in your account and you simply refuse to pay until the issue is resolved.
• Debit cards do absolutely nothing to your credit score. If you have self-control, using several credit cards and paying them off consistently over several years can actually help build your credit score.
• Debit card purchases are a plastic alternative to cash. Although there are a few debit card reward programs, typically, credit cards offer more variety and greater rewards (think sky miles, lower gas prices, hotel points, and cash-back). You might as well get something in return for spending your hard-earned money!
Debit cards are good and convenient. They allow you to make purchases and get cash from an ATM.
Credit cards are better. They are also convenient, they let you hold your money longer, they offer greater fraud protection, they let you build your credit, and they offer better rewards.
All I have written is null and void if you spend more than you have due to credit card interest rates. However, if you are responsible and don’t max out your credit cards and pay them off every month, then all of the pros I have given for using your credit cards for purchases are valid. As long as using your debit card remains free, then by all means use it; but only at the ATM.