As a credit card user who takes advantage of rewards programs while paying on time, I was intrigued when a representative from a prepaid debt card company approached me about supporting Financial Samurai and sharing more their product.
As someone who has mainly used credit cards since college, I was curious to know what the benefits of a debit card over a credit card were.
Let’s talk a little bit about the benefits of a debit card over cash and credit cards, as well as any detriments.
Debit Card Benefits
1) Protect yourself from yourself. The most important benefit of using a debit card is that once your account goes to zero, you aren’t able to spend. If you’ve only got a debit card in your wallet, you will theoretically never spend more than you have, which is a very healthy thing in this age of consumerism. You can load up your debit card by a certain amount a day or a week or a month, and only spend that amount you can load. Further, there’s usually a maximum debt card balance as well.
Th U.S. personal savings rate has never been very high in the history of America. With the COVID-19 pandemic in 2020, the savings rate has shot up to about 11%. However, to achieve financial freedom, I encourage everyone to save closer to 20% or more of their after-tax income.
2) Peace of mind with insurance. The second benefit of a debit card over cash is insurance. Instead of carrying around a couple hundred bucks in your wallet, just carry a debit card. If you get jacked on the streets while shopping, you can rest assured the robber won’t be able to use your card, and if they do, you have the debit card issuer on your side.
I never recommend anybody ever put up a fight with a mugger by the way. Your wallet/purse is not worth injury or your life, especially if you have a replaceable debit card. There was one time I was foolish enough to stand up to muggers while on a business trip to Beijing. I could have easily disappeared and never be heard from again. My debit card refunded all my money. If I knew they would, I would have handed over my debit card and its code right away!
3) Rewards programs. Just like with credit cards, debit cards also have rewards programs. For example, the ACE Pink Prepaid Debit Card’s award to the consumer is that it donates a portion of all revenue to help fight breast cancer – a total of more than $350,000 in the past two years. You should shop around for various rewards benefits.
4) Convenience. A debit card can be used for online transactions, ATMs, and anywhere that Mastercard and Visa are accepted. Essentially, the debit card is a fantastic cash replacement for most transactions, except for when you lose NCAA tourney bets!
5) Something interesting to talk about. Let’s say you are rocking a pink debit card that supports fighting breast cancer. You bust it out at a bar and keep the tab open. Who knows, you might be able to start up a conversation with someone just by nature of your debit card. When we’r sitting around the table about to pay a bill, we’ve all talked about the various benefits of our cards before. A unique debit card is a conversation starter.
Debit Card Disadvantages
1) Protecting Yourself From Yourself. If you are at the BMW dealer and really want to splurge, you might only be able to buy a set of wheels instead of the whole car with a $10,000 limit from ACE or any other card. That said, I’m sure if you demonstrate your financial muscle, they’ll increase your funding.
2) Men Mock Men. If you hang out with a bunch of unruly, insensitive dudes, they might mock you for being a good guy and carrying a pink debit card. If you’re too insecure to use it, then you best keep it hidden or use cash or a manly credit card instead.
3) A Card Is Still A Card. The reason why paying in cash is so painful is because cash is real, and a debit card is less real. Although you can’t spend more than you fund in your debit card, you can spend it all if you are weak.
4) Fees. Debit cards can charge $10/month on average for it’s use. The good thing is that if you are going to the ATM machine several times a month, that cost negates out.
A Debit Card Is A Good Cash Alternative
I’ve never really thought about using a debit card until now. Having been jacked at gun point in a strange land before, I’m hesitant to carry more than $100 in my wallet.
If I could carry zero cash in my wallet and just use a debit and credit card, that would be the ideal scenario. A debit card is a useful tool for many of the reasons stated above. Just remember to spend responsibly!
The key to financial freedom is to save aggressively, spend within your means, and build as much passive income as possible. The longer you can stay disciplined with your finances, the stronger your finances will become.
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I’m of the philosophy if you are disciplined, that credit cards with cash back are the way to go – unless there is a debit card that gives me 1% cash back, but I’m not aware of one.
.-= Jeremy Johnson´s last blog ..The Ant Philosophy =-.
I believe that credit card can be of advantage if it is used properly. The payment and due dates should be kept in mind and also we can take benefit out of free offers and points. It is recommended not overuse credit card.
Add me to the list of credit card users. I’ve never had a debit card, although I’ve sometimes wondered if it might be the better choice. Certainly, anytime I’ve felt stretched to pay off my credit cards, I wonder if a debit card (or combination of debit cards and cash) would be the better choice. Still, I do like the added protections cards have (I corrected a mistaken charge on my American Express in the course of one ten minute phone call, with few questions asked) and the bonuses that are available. If I see a debit card with those kinds of features, I’ll consider switching. (Or if those stretches start stretching me too far…)
Yikes, glad you are OK matey! Amsterdam, I’ve never been. Maybe one day!
I like using one credit card that earns rewards points towards gift cards and things. It’s easy to just have one bill to pay and I keep track of my spending better that way. I used my debit card in the past but now that I earn more points on my credit card I use that instead. I’m also pretty disciplined with spending so I trust myself with a credit card. If I were giving advice to my parents though, I’d definitely say they should go the debit card route as they’re bad at controlling their spending.
I’m not too familiar with debit cards, and don’t have any. If I had to pay fees to use the card (debit or credit), I would look for another card that doesn’t charge any. Fortunately, I’ve learned to pay my bills on time and in full.
I have about two cards in my wallet, and try to limit the amount of cash I carry to $20, although I’m not always sure how much is in there at any given time. That’s something I could improve on.
So it’s great that you got the debit card to support your site, and I applaud what they’re doing to help the fight against breast cancer. But I like the points and the float I get with the credit card.
This may be a bit off topic, but do you mind sharing how you got them to approach you about supporting your site?
.-= Darren´s last blog ..Selecting An Insurance Company – The Key Factor To Consider =-.
Hi Darren, they just contacted me. It’s part of the Yakezie Challenge…. you get approached from various folks out of the blue once you get high enough.
.-= admin´s last blog ..Why Are President Obama And The Democrats Against Charity? =-.
Very well said. These are accurate advantages and disadvantages to using a debit card versus carrying cash. As far as the men mock men statement, we can always hide the card in a little paper card slit and slide it very carefully…lol and inconspicuously so our male friends don’t see it…lol.
.-= Jarrod@ Optimistic Journey´s last blog ..You Know You’re Favored by God When… =-.
I’ve always done well with credit cards, ever since my parents pushed them on me when I was younger to build up my credit score. They taught me to spend within limits and to pay me balance off monthly, so I never really had a balance that I didn’t pay off monthly. I was lucky!
I’m not sure if using a debt card improves your credit score or not, but I guess it would?
To day, I still only carry a credit card and cash. For me I don’t see the benefits of a debit card, but I will say that it is much more like cash than a credit card.
I think that most people will look at a debit card as cash and realize that once they use it all up, they are broke. I hope this makes debit card holders more aware of their finances.
Some day, I will have a debit card! I’d much rather carry it than cash!
Sam, you were robbed at gunpoint? Saying “That suck“, really undermines how horrible that ordeal must have been! You’ll have to blog about it someday… Hope you came out of it unscathed!
.-= Money Reasons´s last blog ..Saving By Paying Attention – Conclusion Part 4 of 4 =-.
Hey Don! First of all congratulations on becoming debt free in February! YESSSS!!!!!
“No” is the quick answer to your question on whether a debit card helps or hurts your credit score. As you said in your comment a debit card is you using cash (your own money). Since you are not borrowing money and not having to make payments there is no form of repayment history that a credit score can derived from!
Congrats again on the debt freedom!
.-= Carlos Frank´s last blog ..Coupon Mama Shows You How to Make a Dollar Out of 15 Cents! =-.
Yes not a great experience getting mugged Don, but that’s life! I actually have a post in my archives talking about the experience, but am waiting for the right time to publish.
Congrats on being debt free as well!
We pretty much only use our debit card. I carry probably $5 in cash with me “just in case” although I don’t know what I could do with $5 other than buy the kids a candy bar or soda.
We use our credit card only for larger purchases where we think we “might” return the item if we aren’t satisfied with it or if we make a purchase online. I never use my debit card for online purchases. We always pay our credit card bill off entirely each month.
As far as unauthorized debit card charges go, Mr. Not Made of Money goes online every night with our credit union to make sure we don’t have any unauthorized charges to it. We do have fraud protection on ours but we like to be proactive so we just police the account ourselves. Plus, it keeps us in tune with our account balance and our spending habits.
.-= Mrs. Not Made of Money´s last blog ..Ham Leftovers Anyone? =-.
Here’s a breakdown of how money travels thru my hands:
80% Debit Card (use as a credit card and online)
18% Cash (Gas and food envelope system)
2% Checks
0% Credit Card
Not a big fan of pre-paid debit cards that charge a monthly fee! One thing that I have used them for in the past is if we’re traveling on vacation to help keep us in budget! Like you said once the card is at zero you can’t spend any more.
And another thing I will use it for is to make purchases online when it’s on a site that I’m not 100% about, but I just have to have the product or service! Just in case they want to jack me online they won’t have access to my regular bank accounts.
.-= Carlos´s last blog ..Coupon Mama Shows You How to Make a Dollar Out of 15 Cents! =-.
@Neal @ WealthPilgrim.com
Plus debit cards don’t have the fraud protections that credit cards have. I once had about $5,000 taken from my debit card from an online merchant that kept fraudulently charging my card and Bank of America was great in that they sent out a private investigator to fix the situation and I eventually got all of my money back BUT it took probably 5 hours of work on my end and I had to wait almost 6 months to get the money back into my account. If I had used my American Express then all it would have taken was one phone call and the money would have been refunded within the day most likely.
.-= Credit Card Chaser´s last blog ..Are Credit Card Concierge Services Worth the Cost? =-.
I’ve had issues with my CC as well though due to fraud. But 5 hours? No… 1 hour, yes.
Debit cards due have fraud protection, I guess it just depends on which one gets.
.-= admin´s last blog ..Riding Rocketships For Greater Success =-.
I hate not having cash on me although I make a habit of never paying cash if I have the option of using my credit card because I want to earn as much cash back as possible. I do hate the feeling of not having cash in my pocket though in case I am traveling and need to tip a driver or whatever. I have never had a problem with wanting to spend money just because I had it in my pocket but my wife on the other hand haha :)
.-= Credit Card Chaser´s last blog ..Are Credit Card Concierge Services Worth the Cost? =-.
You think there is an opportunity for someone to start a site called: “Debit Card Chaser”? :)
.-= admin´s last blog ..Wealth Is An Illusion Of Happiness =-.
lol sure! (Although there are also prepaid & debit cards you can research on CCC as well: )
.-= Credit Card Chaser´s last blog ..Are Credit Card Concierge Services Worth the Cost? =-.
I only use credit cards. I want my miles…no wait…scratch that…my wife wants my miles.
I have never paid a penny in interest and it’s my way of “sticking it to the man”. A debit card would take away all my fun.
.-= Neal @ WealthPilgrim.com´s last blog ..How to Become A Financial Planner =-.
Ha, good wife. Free 30 day credit is a good thing indeed.
.-= admin´s last blog ..Insuring The Uninsured Is Worth It =-.
I always use credit cards. I love the rewards, and the ease of it too. I am worse with cash. The cash flows out of my wallet, and when it’s empty, I wonder where it all went! With my credit cards, I always have a record of where the money went. I pay off the balance at the end of the month too, so it works great for me.
I always used Debit Cards over Credit Cards, I just never liked purchasing everyday things on a credit card, but that’s due to preference I guess. I usually carry my debit card and $30 in cash just in case. I always love using my debit card because of the 4% interest I get on my cash just for using it, so that can’t hurt either.
It’s pretty fascinating how some prefer Debit cards over Credit Cards and vice versa. 4% interest on your cash for using it? Can you explain more? If you use your cash, doesn’t it away?
.-= admin´s last blog ..Insuring The Uninsured Is Worth It =-.
Credit all the time. I love the float and the points. If not credit then cold hard cash.
I don’t like debit cards for many reasons, especially girly ones ;-) Then again I have a nursing branded credit card because of my wifey is one ;-)
Most ATM cards ARE debit cards, which have other security issues.
.-= Investor Junkie´s last blog ..When Should A Late Customer Get Cut Off? =-.
“I don’t like debit cards for many reasons, especially girly ones”
Only if the card is pink.
I carried a debit card until I was confident I could pay off credit cards. However if you ever end up paying interest, a debit card is great for saving you from yourself, as you say here.
Interesting regarding you highlighting it’s a “confidence” thing. I guess we all have a certain amount of belief in our own spending habits. And to understand them is tantamount.
.-= admin´s last blog ..Why Are President Obama And The Democrats Against Charity? =-.
I am slowly moving back into Credit Cards, but I am mostly a debit card kind of guy vs. Cash. I can’t keep cash on me, I have no idea why, but if I have cash in my pocket it burns a huge hole!
I guess the most important thing is to know yourself and what works better for you
.-= Evan´s last blog ..Helping my Brother Choose an Online Broker =-.
There is a number of ways you can get out of debt, one of the most effective ways is to challenge your credit agreements for enforceability. If the debt cannot be enforced it can be legally written off and you don’t have to repay a penny!
I carry a debit card and use it the same way I once carried around a few checks – for small purchases at the grocery store, bookstore, pharmacy, etc. Very convenient, you can often get cash back on your purchases, and I’ve never had a fee charged (perhaps because I use the card so much). Unlike a credit card, the money comes right out of checking, so there are no finance charges or accrued statements to worry about. And so long as you know your balance in checking, there shouldn’t be any risk of overdraft.
I do still carry around about $40-50 in cash as a rule, because for one thing, a lot of merchants impose a minimum for using any type of card. They’re not supposed to; they’re in violation of their agreement with MC or Visa, but I usually don’t make an issue of it.
So yes, definitely go for a debit card. But not in pink.
Ha, nice. Nothing wrong with pink! Like I write, guys may dish out heat, but the ladies will too, and that’s a positive!
.-= admin´s last blog ..Wealth Is An Illusion Of Happiness =-.
I go back and forth on that one. Here in France, the cards aren’t so well insured sometimes, so you have to be careful of them getting stolen. The limit is also much lower–about 300 euros per week at an ATM and 1500 euros in purchases. Usually, we’re ok with this, but you can run up against the limit if you buy something big and then want to buy something else shortly after (this is for your protection in case the card is stolen).
There are also fewer people that take a card here in France, so some cash is often mandatory.
That said, I find that when I have cash in my wallet, I’m more likely to spend it. It’s perhaps the opposite of what you seem to have experienced. Let’s say I have 20 euros and spend most of it at the market buying fruits and veggies. . .now I have 3-5 euros in my wallet and I’m likely to spend it on coffee etc. If I have no cash for small impulse purchases, I won’t make them.
.-= Simple in France´s last blog ..Reading for a Snowy Sunday in April =-.
Interesting insights Simple 300 euros per week at an ATM doesn’t sound like much, b/c I guess that makes sense given you can spend $1,500/week for purchases. Should encapsulate the majority of users I’d think.
It’s weird…. when i have cash in my wallet, I treasure those paper more dearly and tend NOT to want to spend it. My mindset is to have that cash sit for as long as possible, only on emergencies b/c its tangible and I can use my credit card for almost everything. In the back of my mind, I think about the reward system frankly as well.
.-= admin´s last blog ..Insuring The Uninsured Is Worth It =-.