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The Convenience of Using a Debit Card

Written by Nickel - 13 Comments

I’ll be the first to admit that I’m a diehard credit card user. This will come as no surprise to regular readers, as credit cards are one of my favorite topics. Over the past few months, however, I’ve learned to love using a debit card, as well.

For personal purchases, I’m still sticking with my reward credit card. But when it comes to business-related purchases, I’ve found myself drawn to using a debit card despite having a dedicated business credit card. The main reason that I like using the debit card for this sort of stuff is that I don’t actually have that many business expenditures. Thus, it’s hardly worth the trouble of dealing with an extra bill at the end of the month.

While I’m nowhere near being ready to give up on credit cards, I can definitely see the attraction of debit cards in certain circumstances.

Published on May 7th, 2007 - 13 Comments
Filed under: Banking, Credit Cards

About the author: is the founder and editor-in-chief of this site. He's a thirty-something family man who has been writing about personal finance since 2005, and guess what? He's on Twitter!

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13 Responses to “The Convenience of Using a Debit Card”

  1. 1
    Toby Says:

    That is until your card information is compromised (lost/stolen wallet, skimmed at a restaurant, etc.). Cleaning up fraud on your debit card can be a little more painful than cleaning up fraud on a credit card. Afterall, when fraudulent purchases are made on your debit card it is your money that leaves your account. When a credit card is compromised, it is the CC company’s money. While the fraud protection rules for debit are getting better, I would rather not take the hit to my cashflow while the bank tries to figure out what to do. The fact is, I don’t even carry the debit/ATM card for my main checking account in my pocket. I have a second checking account that contains a few hundred in walking-around money. My mortgage and bills get paid from a completely different account. That ATM card is locked in a safe.

    Yes, I’m *that* paranoid.

  2. 2
    Chris Jones Says:

    I use a debit card for virtually all purposes and I never carry cash around with me anywhere. It is a lot easier for me to have Microsoft Money download transactions from the web rather than me manually entering in all receipts!

  3. 3
    Chris Jones Says:

    Toby – I don’t know what bank you have, but I can call the bank as soon as I realize my card is stolen and they will block it immediately. No waiting for the bank to decide what to do, just block the old card and walk into a banking center and have a temporary card issued.

  4. 4
    Toby Says:

    @ Chris Jones: That’s not what I meant. I was talking about when you notice fraudulent charges not when you notice your card goes missing. If your card is compromised without your knowledge, you may not notice the transactions until the next time you check your balance. On top of that, once the money leaves your account, the bank does not just give it back immediately; they usually insist on investigating first. Like I said, the protection levels and bank responses are changing rapidly because banks want you to use your debit card, but it is still your money on the line and not the bank’s.

    I didn’t include this anecdote above, but to illustrate my point, here goes:

    Last year, a friend of mine was using her debit cards exclusively for all purchases. At some point her card and PIN were compromised. On the last day of the month her paycheck was direct-deposited. Two days later, many ATM withdrawals occurred from her account to ATMs in some Eastern European country she’d never visited. Her entire paycheck was siphoned off in two days. In the meantime, her mortgage check was “in the mail” and would be cashed at any moment by her mortgage company. She had to scramble to get her bank to honor her mortgage payment check and had to document the fraud with a police report and other documentation. Everything worked out but it was a scary couple of weeks for her.

    Now, she’d have the same hassle of documenting her transactions with a credit card, but at least her cash-flow would not have been disrupted. You can see how losing a paycheck would have a ripple effect on many people’s finances (not just the paycheck-to-paycheck crowd).

  5. 5
    Blaine Moore Says:

    I agree with Toby; it isn’t worth the risk at this point.

    My business expenses may be low and infrequent, but having one more bill at the end of the month doesn’t bother. I pay my bills online, so the transaction fees are carried by the card, not by my postage.

    That being said, I’m too anal to allow my money file to download my transactions. I record them all by hand, and I hand reconcile them when the statement arrives. If anything is off by even a penny or two, I investigate to see who is at fault (almost always myself, but not always).

  6. 6
    seth Says:

    A little word of advice. Here’s an experiment to do. Spend all your personal purchases in cash one month, and then to the same on a credit card. Compare the two. CC companies have learned that you’ll spend 4-10% more on a CC because it doesn’t register that you’ve spent money. The wallet is no less thick, and they’re just numbers on a piece of paper. I would only recommend the credit card deal for people who are completely out of debt (except possibly for a house.) Full disclosure: I use a Fidelity Investment Rewards card that I love. Everytime I spend 5k they deposit $75 in my Fidelity brokerage account. It’s not a lot, but at 1.5% reward it’s higher than most reward programs, plus the power of compounding adds significantly to my retirement plans. Only thing that sucks is that Fidelity charges an arm and a leg for trades, $19.95 per trade, which I believe is the highest in the business.

  7. 7
    Andy Says:

    I never got the “people spend more on credit cards”. I always spend way more with cash because there is no record of the purchase. With credit cards when I look at the statement I have to remind myself of all the useless crap I bought ;) .

  8. 8
    Andy Says:

    Also, Fidelity only charges $10.95 if you have $50k or more.

  9. 9
    Wayne Says:

    We use debit cards almost exclusively. Gas, groceries,clothes, etc all go on the debit card. I pay most my bills online, and do that as soon as get them and schedule them o pay asap. I use cash when we eat out. I check our checking account balance at least 3 times during the week. I have found if I keep up with the transactions, don’t schedule payments for future payments, it is so much easier to reconcile the account. Just takes a few minute. The occasional check which takes time to post is infrequent, which helps in reconciliation. No more buying things and waiting for a credit card bill to pay for us. If I can’t pay for it at the time of purchase, I don’t buy it.

  10. 10
    Mama Money Says:

    We use credit cards exclusively, but I’m thinking of going all-cash for a month to see if our spending habits change.

  11. 11
    Jason Says:

    I agree that it’s better to use credit cards for everything. I ran a tab at a bar/restaurant (where they require you give them your credit/debit card). They mistakenly ran someone elses bill on my card, but then realized it after it went through. They voided it out immediately. The problem was I used my debit card, and the funds were immediately taken out of my account. I called the bank (Band of America) when I saw it and they told me it would take up to 2 weeks to get the adjustment. In fact the customer service rep joked with me that it takes 2 minutes to take the money out but 2 weeks to get it back. It ended up taking alittle more than a week. It was only about $100, but could have been much more. That was the last time I used my debit card for a purchase, almost 2 years ago.

  12. 12
    MikeVxq Says:

    Well, I use debit cards, but I have special accounts for them that are not used for anything else but small checks now and then for odd things. I do that just to keep the computer from deciding checks never happen.

    Number one on my stupid financial moves list is having a debit card on your household account. There is no excuse for this. I will upset people with this statement, but a debit card on an account used for any other substantial purpose is an act of stupidity. You WILL be bitten by either fraud or fast food errors (the $8000 lunch anyone?) and while the bank may help you clean up the direct mess, they will be of little use for the hundreds to thousands you may be out due to payment failures leading to things like raised rates.

    If you feel the need for a debit card, open an account just for that, and stuff the money you plan to spend in it a few days ahead. Then when something happens such as fraud or fumble-finger errors, the damage is contained in that account.

    Debit cards are very useful, but they have no place on a general-purpose bank account.

  13. 13
    L Says:

    Check with your credit union or bank (FI) to see what fraud policies they have in place for such instances of lost/stolen cards or fraudulent activity on accounts. If you’re a member of a great FI, they have fraud monitoring software for all the above instances and may even contact you before you realize there’s been fraud on the account. If your FI doesn’t do this, think about finding a new one. Equally important, if you do encounter a frauduent situation, being a member of a CU or local bank is frequently more beneficial as you will be recognized by name/face and they will know your account history – so you’ll have a much better chance of quick, personal service than sitting on a 1-800 that connects you to the operator in India. As to the above comment, because of the relationship you have developed and monitoring software, when someone does screw up and enter an extraordinary amount for your bill, you can expect to receive a phone call from your FI. Also most FIs have daily spending limits on their debit/check cards (unless you request to remove it), so a sum of $8000 would set off all kinds of red flags. Just some words of reassurance to those debit/check card users from the CU world.

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