[NA]Debit v Credit card

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Let'sgoflying!

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Dave Taylor
I am being asked about this by an employee. Not ever having had a DC I am flailing a little.
I think...

DC
-you don't have to write a check to the CC company
-we know some places won't take a CC but will take a DC
-you can't overspend
What else?

Is it the case that a DC is like cash, someone could clean out your account if you lose it?
 
In my experience, Discover keeps much closer tabs on my account than my bank does with my debit card. If I use my Discover card within my local zip code...no problems. Use it out if state without notifying them and they’ll lock the account immediately, which is great security. My bank card isn’t that way.
 
If you need to dispute charges on a debit card you have to remember they are not using your credit line. They are using your account balance. Huge difference and the primary reason I never use the debit. Made that mistake once upon a time and I’ll never do it again.
 
I see it as a "Checking account card". They take it straight out of your checkbook. I only use mine for ATM withdrawals. But boy did I get confused when I went to buy gas at a Circle K and they wanted to sell me one. How's that go?
 
Some places (hotels, gas stations, FBOs!) will put a temporary charge on your card, then replace it with the real charge when the transaction is complete. If you have a credit card, then is is almost totally transparent to you (in my experience). If you have a debit card, this has the effect of temporary lowering your balance, which could prevent other transactions in the meantime if you live on the edge. There are probably some retail business people who can explain it better.

Some people are good money managers and can handle credit cards, and need their flexibility. Others need the enforced discipline of a debit card, or don’t need the flexibility. Everyone’s mileage varies.
 
Summary from Investopedia.

I minimize my debit card usage due to the reasons below. There are very, very few places I find that only accept debit cards.

The Fair Credit Billing Act allows credit card users to dispute unauthorized purchases or purchases of goods that are damaged or lost during shipping. But if the item was bought with a debit card, it cannot be reversed unless the merchant is willing to do so. What is more, debit card theft victims do not get their refund until an investigation has been completed. Credit card holders, on the other hand, are not assessed the disputed charges; the amount is usually deducted immediately and restored only if the dispute is withdrawn or settled in the merchant's favor. While some credit and debit card providers offer zero-liability protection to their customers, the law is much more forgiving for credit card holders.​
 
Other than withdrawing cash(which is a very expensive proposition with a CC) and buying a few things that are discounted for "cash", a CC is superior in pretty much all aspects if you have enough credit. It has a far better protection against fraud. It is not tied to your checking account directly and doesn't mess with the balance(as Van Johnston mentioned). Most CCs offer some sort of rebate these days. BUT, the user has to be able to manage it or can get into trouble. You cannot spend money(generally) that you do not have with a DC. OTOH, i imagine you can artificially limit the credit limit on the card(never tried it)

In some cases(some gas stations still do that for example), DC transaction may cost you less money as there is no CC fee associated with it and the savings are passed along to the customer. This is pretty rare these days. In some cases it's the other way around(also rare).

I never ever use my DC(which is a Visa) for anything other than cash or emergency.

Discover is pretty descent. Good rebate program for a year. After that it becomes more like your everyday "category rebate" card that is not as widely accepted as Visa/MC. I wouldn't have it as the only card, but they have been good to me. They also give you your FICO score(some other cards do that as well)
 
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What about building a credit rating?

Getting lower interest rates on car and home loans is a perk of a good credit score. I'm really not sure how a credit or debit card helps in that area.
 
ElPaso Pilot said:
Summary from Investopedia.

I minimize my debit card usage due to the reasons below. There are very, very few places I find that only accept debit cards.

The Fair Credit Billing Act allows credit card users to dispute unauthorized purchases or purchases of goods that are damaged or lost during shipping. But if the item was bought with a debit card, it cannot be reversed unless the merchant is willing to do so. What is more, debit card theft victims do not get their refund until an investigation has been completed. Credit card holders, on the other hand, are not assessed the disputed charges; the amount is usually deducted immediately and restored only if the dispute is withdrawn or settled in the merchant's favor. While some credit and debit card providers offer zero-liability protection to their customers, the law is much more forgiving for credit card holders.​
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"settled in the merchant's favor" Which in my experience almost never happens. Even if the customer makes a questionable claim. This depends on the card issuer and "level". A lot of times, the merchant doesn't even get into the conversation. I've had some disputes(legitimate) where my CC company tried to contact the merchant and failed(sometimes simply because the hold time was too long) and then ruled in my favor based on my story.
 
Matthew said:
What about building a credit rating?

Getting lower interest rates on car and home loans is a perk of a good credit score. I'm really not sure how a credit or debit card helps in that area.
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CCs help(or hurt) a lot. DCs don't do much. Revolving credit(least secure) utilization is a high percentage of your credit score. So the more CC credit you have and the less of it you use(under 5% is generally good) the better your score will be

EDIT: correction, i meant under 10%
 
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Matthew said:
What about building a credit rating?
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One of the main reasons I got a credit card. When I turned 21, it was time I began building some credit for myself.
 
Ryanb said:
Use it out if state without notifying them and they’ll lock the account immediately, which is great security.
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Never had that happen with any of my cards. (Discover included) But it might be because I have alerts for any charge sent right to my phone and email. Usually get the text message before I have the receipt in my hand.
 
I always did credit cards because it leaves a firewall between your card account and your actual money... also rewards points. If you lack financial discipline I think most of them will lower your limit on request.
 
I never -- EVER -- use a debit card to buy anything, ever. I use it only as an ATM card. My wife knows to do the same. If someone steals my credit card information and charges thousands on it (it's happened before), I'm not out a penny. If someone empties my bank account before I catch it... sure, maybe I'll get that all returned eventually, but what about all the automatic billpays that fail in the mean time? No thanks.
 
I'm in the credit card processing business. Pretty much no inaccurate info been posted, for all practical matters whats been posted is accurate. Chargebacks on CC are almost always settled in customers favor, the merchant is "Guilty till proven innocent" basically. We had a merchant whom had a sizable chargeback and had the customer on security camera and the customer was still successful in saying "Wasn't me" to the charge. Both the laws and rules of the card companies are written in the customers favor- so yes chargebacks are much easier handled with a CC than a DC, though I would only encourage legitimate chargebacks, if its not legit it's theft in my book, even if you get away with it.

I had always used my DC for daily purchases then my debit card broke, so I started using my CC and paying it off, I have come to like it so I am applying now for a good rewards card. 3% back on gas, Hulu, netflix, XM Radio and dining, then 2% or 1% on the rest. I spend a ton of my income on gas between the plane, boat, snowmobiles, two cars and a suburban- I'll gladly take 3% back on something I would spend money on anyway, same with my Hulu and Netflix... Different reward cards better for different situations so hunt em out and see what one works for you.
 
We use our CC for nearly everything except groceries and beer, that goes on the debit card. There are just some things I don't want to buy on credit, even if we do pay it off each month.
 
Vendors pay a fee for Cc transactions. Sometimes that fee is paid by the buyer. There are no fees for debit cards. I always use my debit card when I can. I'd rather the vendor got to keep those few percent rather than the bank getting it.
 
I use a credit card for everything I possibly can -- it's a 1-5% discount on every bill, grocery run, or tank of gas. Those annual discounts/cash-back rewards add up; we see a couple grand a year in savings. Haven't paid a penny in CC interest in years. I have ONE card that charges an annual fee, but it's a hotel card that gets us a "free" night every yer. So, in effect it's a $50 hotel room once a year. Even that one is getting cancelled this year.

The vendor's fee is their problem, and the cost is the same to me no matter how I pay (with a few exceptions).
 
Stewartb said:
There are no fees for debit cards.
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Actually, there is a fee for a merchant to accept a debit card.

But it is significantly less than a traditional credit card. Often just a $0.50 -ish processing fee.
 
I use my credit card for mainly gas and groceries. If Bank of America is running a cash back deal I’ll also use it at the specific place. I have a travel rewards card that I exclusively use when I travel overseas. Debit is used for everything else.
 
AggieMike88 said:
Actually, there is a fee for a merchant to accept a debit card.

But it is significantly less than a traditional credit card. Often just a $0.50 -ish processing fee.
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Yep. Some grocery stores used to charge that fee for using old debit cards with PIN(not Visa/MC branded). Don’t know if they still do that, but most DCs do not need pin anymore unless withdrawing cash. They probably also wised up that it costs them significantly more to process CC than that small DC transaction fee
 
genna said:
but most DCs do not need pin anymore unless withdrawing cash
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Some merchants I routinely use are set up to not ask for the PIN if the transaction is very small, such as less than $10.00.
 
I don't carry much cash. I use a debit card for just about everything. Almost never use cash. Almost never use credit card. I've never had an issue with it.
 
NEVER use my debit card for purchases.

When there is a charge to your debit card and there is a dispute or fraud, your money is gone from your account and you have to fight to get to back.
When there is a charge to your credit card, it is the CC's money out the door and you only have to dispute if you need to pay or not which they usually delay payment until the issue is resolved. You never loose the money unless you are the one in the wrong.

I like playing with the house's money rather than mine and I have had a lot of fraud.

On top of that, anything and everything that I can charge to my CC I do and rack up rewards points. Strategy only works if you are diligent on paying it off in full every month but if I am spending money, why not get something back for that spend? I have more travel points that I know what to do with.
 
I use the DC for everything. Haven't had a cc for years.
 
EppyGA said:
DC is only used for cash withdrawals from the ATM.
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^What he say!

Never use a DC for anything or anywhere else. Credit cards are more secure, IMHO. A few friends I have that were victims of theft were from DC’s. All were compromised using the cards for small purchases, like at a deli or gas station.
 
Credit card for all purchases, pay it off every month, use their money for free. Debit cards do not give as much protection against fraud, plus you don't use their money for a month. Debit card only for walls that give out money.
 
I got 4 checking accounts, each came with a debit cad. 3 I destroyed and one I keep for ATM when I need cash which isn’t often. That account I leave $305 in. When I get cash I transfer money from another account to get it back up to $305. I use credit cards every time I can unless the merchant charges a fee which isn’t often. So I don’t pay for anything until the due date on the account.
 
I’m surprised there are so many here that use debit cards. I’m curious if there’s a correlation with the ago of the users. Credit has a lot of advantages over debit (noted above) and if you pay it off every month there are no downsides. And with auto bill pay there is no reason to ever miss a payment.
 
My debit card is a credit card. It's tied to both the bank account and a credit account and I can run it as either. I get the same protections either way I use it. I use it as debit because its usually easier to punch in a pin.
 
Not as much credit card usage in Europe. Half the restaurants don't take them. My tire shop will only take debit cards. I hate it. At least gas (diesel) and groceries are always credit card. Back in the States my debit card is for ATM withdrawals only.
 
Use the DC for atm withdrawals, use the credit card for all other purchases, like the points or cash back.
 
As has already been said a bunch of times, the lack of account protection on a debit card vs a credit card, coupled with the 2% or more discount on virtually everything on most every credit card makes this pretty much a no-brainer... ESPECIALLY because of the lack of account protection. I'm much more careful than your average bear about internet and card security, and I've STILL had my credit card information used illicitly twice to make purchases. Both times, it was a non-event... a call or two to the card company and all was fine.

Pay the balance in full EVERY month. That is a REQUIREMENT, not advice. If you don't, or can't, do that, cut up your card. The only reason I've ever heard for using a debit card instead of a credit card is FOR folks who can't seem to stop spending money they don't have by using credit cards; at least with a debit card, when you run out of money, you get a "card declined" and no huge multi-thousand-dollar loan-shark-interest-charging loan to pay off forever. To that, however, I would add that, if one is that kind of person, one should just stick to using cash; the act of using the debit card will still probably allow you to spend money faster than you would if you saw the cash coming out of your wallet or dresser drawer.

Just some thoughts.
 
I've only had a fraud charge go through on a debit card once (well, actually twice, but within seconds of each other), and it was handled superbly by the issuer (PayPal). The money was back in my account within minutes. I also had attempted charges made on another debit card, but the issuer (my credit union) caught it and declined it. Both were old magstripe cards.

I use my PayPal debit card quite often because it pays cash back and because it's convenient. Because PayPal is also my credit card processor, the money's already there. I also use my credit union debit cards once in a while to make sure they still work. Other than that, I usually use credit cards.

I would use my debit cards more if they had the option of disabling PIN-less transactions for POS purchases. I'd also like that option on credit cards. The chip provides no protection in the case of a physically lost or stolen card. I also think its stupid to print the CVN on the card itself, for the same reason.

Rich
 
Skip Miller said:
@Huckster79 Let me ask you a question, then. A Restaurant near me has recently started charging a fee for MC and V credit card purchases vs. paying cash. I thought this was against the CC company rules?

-Skip
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Great question! I would say be ready to see this more and more... There are some technicalities, which I won't bore you with but the readers digest version is if done properly it is fine both legally and by card company rules. What you are referring to most likely is a cash discount program. Basically the business says we will give you a discount if you pay in cash, often saying that posted prices already reflect the cash discounted prices, and if you don't pay with cash you therefore lose that discount- though they certainly should be disclosing that minimally via signage. There is some "scuttlebutt" right now that Visa doesn't like this model, but there are areas where it is quite prevalent and I beleive they are going to have a hard time putting the toothpaste back in the tube... But both the Durban amendment to Dodd Frank and the credit card company rules do allow for businesses to discount to encourage the use of cash. Businesses are allowed to surcharge credit cards if they register with the card companies but are not allowed to surcharge a debit card. It's hard to distinguish and deal with that in practicality which is why the cash discount has become so popular as that is allowable for both if done properly.

It all boils down to cards are very expensive for businesses to take. Many people don't realize it costs a business to run our cards. If they have a dishonest processor (There are lots of those!) it can be very, very, very expensive, but even with one of us who does all we can charge our merchants reasonable honest processing rates it ends up a sizable expense due to the fact the majority of the expense is the wholesale cost from the card brands. Wholesale cost of a debit card (before the processor-staight to the card company) can be as low as .005% and $0.22 a transaction to a commercial credit card or Amex card pushing 3% and $0.10 a transaction. So it often can cost a business 2%-3.5% to take a card.

So cash discount programs can help a business not increase all their prices to cover this expense as more and more and more of their revenue comes from cards, some businesses are easily taking 80% of their sales via card... One of our merchants that is succesfully using the program came up with a great one liner to explain to customers: "It costs us a lot of money to take cards, with more and more card use we were facing having to raise all our prices or offer this, this program allows us to keep your costs down if you help us keep our costs down"

Well ended up a lil long winded but I tried summarizing it best I could.
 
You have far more consumer protections when you credit card is stolen than when a debit card is stolen. Primarily you don’t have to pay disputed charges on a credit card and a thief can clean out your bank account with a debit card.
 
asicer said:
Debit cards don't give you 2% cash back rewards.
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It used to be that DC's could have a rewards program, but banking regulations changed ~2008 to make that no longer possible. Bummer.
 
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