Your debit card may be a convenient way to pay, but it also has some serious drawbacks. Find out why you should stop swiping your debit card and switch to a credit card.
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Debit or credit? That’s the big question now that cards have supplanted cash as the most popular way to pay.
Debit cards are still the payment method of choice for many consumers since they’re easy to get and don’t carry the potential for credit card debt. But when you really look at the benefits of each type of card, it’s clear that using a debit card is a poor choice. Here’s why you should stop using your debit card and pay by credit card whenever you can.
1. It doesn’t help your credit score
Like it or not, your credit score is an important part of your financial history. And you’re not improving your score at all by using a debit card.
A credit card, on the other hand, is one of the most effective ways to build your credit score. If you use your credit card regularly and make your payment on-time, you’ll build a positive payment history, which plays the biggest role in your FICO® Score. Credit utilization plays the second-biggest role, and that’s another factor you can control with responsible credit card use.
2. You aren’t earning rewards
There used to be plenty of banks offering rewards on debit card purchases, until legislation limited the fees that banks could charge merchants on debit card transactions. Because of that, hardly any banks offer debit cards that earn rewards, and the debit cards that do have rates of 1% back or less.
Credit card rewards can be extremely lucrative if you know how to maximize them. Even if you don’t want to do much research on rewards, you could keep it simple and go the cash-back route, where the top cash-back cards can earn you 3%, 4%, or even 5% back in specific spending categories. Or, you can check out the best travel rewards cards and earn points to pay for your vacations.
3. The dispute process is inconvenient
As you know, your debit card is directly connected to the money in your bank account. This can be an issue if you need to dispute a transaction, whether it’s due to fraud or a problem with the merchant, because you won’t get your money back right away. Your bank must complete their investigation first and find in your favor, which can take weeks or longer.
When you dispute a credit card transaction, your card issuer freezes that transaction until they’ve done their investigation. You don’t need to pay anything during that time, so you won’t need to worry about being out any money while you have a dispute in progress.