I was at a lunch with friends recently and when the check came, I was the only one to pull out my debit card. This led to a prompt scolding from literally everyone at my table (even the waiter joined in).
- “Why are you using a debit card!?”
- “Dude, you should be using credit.”
- “Don’t you work at LendingTree?
- “How do you not know this?”
I guess this was one of those financial blind spots. We all have them, they’re just more embarrassing when you have them and also work at a financial tech company.
For many of us, reaching for our debit card is almost automatic. It’s the link to our bank account—where our money lives. If you need to pay for something, you should use the thing that has direct access to your money, right?
Turns out there are a lot of reasons where going with a credit-card only strategy makes sense. I’ve listed those below, but first, let’s get the disclaimer out of the way:
- All the following perks are predicated on responsible credit use. That means you’d pay off your cards in full every month. Some of these benefits evaporate if you run up a bill that follows you around for months. So, the general strategy is to use these as you would your debit card, according to your normal budget and spending habits, and then pay them off immediately.
There are plenty of rewards cards that have specific uses—one for gas, another for travel, one for hotels, etc. It’s fairly easy to remember to use those cards when you’re making their associated purchases, but what if you had a rewards card for everyday use?
A simple cashback card can reward you for spending like you normally would with your debit card. No, you’re not going to end up with a mountain of free stuff after a week, but in time, the rewards add up. Besides, earning some rewards for just using a different card is better than the nothing you were earning (and when I say “you” I mean me…because I wasn’t getting anything).
A “discount” on spending
Some cards let you use the rewards you earn on your bill. If you’re paying your bill in full each month, that means you’re essentially getting a discount on your spending habits. It’s like having one of those frequent shopper cards at your local grocery store, but for everything! It might not add up to much, but if you were going to pay it off anyway, might as well get a discount.
At my lunch, this was the top reason my friends cited for using credit. If someone swipes your credit card number and racks up charges, it’s a step removed from your personal finances. You can clear up the fraud with a call to the credit card company before having to pay for charges you didn’t make. If someone swipes your debit card? That’s money right out of your bank account. That can be harder to notice, harder to reverse and it could impact anything else that uses that card or account (think subscription services and auto bill pays).
A close up on your finances
Jumping in to pay your bill each month will give you a closer look at your overall spending, something you might not see if everything just comes out of your main checking account through your debit card. You might find some spending habits you want to adjust or notice services you could do without.
Switching to credit over debit requires you to juggle cards, plus you’ll need to remember to spend some extra time on your laptop or phone at the end of each month to make sure all those bills are paid. But jumping through those hoops is worth it. You’ll earn rewards, gain some security, and avoid an embarrassing lunch with your friends.