Reasons not to use your Debit Card

Debit cards give consumers the convenience of shopping just about everywhere, thanks to affixed Visa or MasterCard logos; but are these tiny pieces of plastic truly the best way to pay?

For today’s credit wary consumers, debit cards are wildly popular. However, there are four reasons your credit card should become your financial weapon of choice and they might start your debit card on the road to early retirement.

Overdraft “protection” that isn’t really protection

In light of new Federal Reserve laws, banks – by the droves – enrolled consumers in overdraft protection programs that do not offer much protection at all. For consumers enrolled in these programs, any charges exceeding his or her balance are pushed through, and overdraft fees charged for each. A $1.00 miscalculation can cost $20 or more. While consumers do have the choice to opt out of this program, there might be additional bank fees to do so, or monthly charges for non-participation. In contrast, credit cards do not let consumers spend over their approved limit, making them a safe option.

Disputed charges take longer to reconcile

In the event that your wallet is lost or stolen, or if your debit card number is used without your knowledge, the checking account linked to your debit card could be drained completely dry. You have no access to money until the bank reviews and clears you of erroneous charges – which can take weeks. Credit cards offer fraud and liability protection and insurance, allowing them to clear up disputes much faster when compared to your garden-variety debit card, and because they are not linked to your everyday bank account, you do not get left in the financial lurch.

You aren’t maximizing your rewards

Many banks that once touted cash back rewards programs for debit card users have withdrawn those programs thanks to the Dodd-Frank Act. Credit card companies, however, still offer cash back rewards programs with their credit cards, meaning that consumers who spend smarter are saving more when using a credit card to pay for everyday purchases and even to pay their bills. At the end of the month, those same consumers pay off their credit card, earning cash back, without throwing a dime away on interest.

You aren’t building or repairing your credit

Debit cards do absolutely nothing for your credit. Using a debit card responsibly does little more for you than keep overdraft fees at bay. Credit card use, on the other hand, is reported each month to all three credit bureaus, helping you build or maintain your excellent credit standing. This aids you when purchasing homes and cars; and even helps you become more competitive in the job market -since many employers now review an applicant’s credit history during the hiring process.

That is not to say that your debit card is all bad. Do not throw your debit card in the trash just yet, but (instead) evaluate how you are using it and weigh your use against the benefits of a credit card. Chances are, when you have weighed and measured your options, your debit card will be left wanting, and you will be left wanting more.