One relatively recent change I’ve made to my finances is that I no longer carry around a debit card. I have two, because I have checking accounts at two different banks, but I store both of them in a safe place in my home, rather than keeping them in my wallet.
Debit cards allow you to access the money in your checking account (and possibly other linked bank accounts), and can be used to make purchases in person or online, as well as to take cash out of an ATM. Sounds convenient, right? Well, I have a few good reasons for leaving mine at home.
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1. I rarely need access to cash
These days, I don’t pay in cash very often. I try to keep some on hand, both in a safe place in my home as well as a little in my wallet, just in case. Some businesses only take cash payments, and it’s nice to be able to leave a cash tip for a coffee or a haircut. But to account for my cash-spending habits, visiting an ATM to take out a few hundred dollars once every few months is generally sufficient.
So I can decide when I want to stop by an ATM, take the card along, and then put it away after I’ve used it. This requires some advance planning, but I’m pretty good at that.
2. Losing it could put my finances at risk
If any piece of your financial picture goes missing, it could be a headache to secure your accounts and get your money back if someone’s made fraudulent purchases in your name. But losing a debit card has the potential to be more serious than losing a credit card. The reason for this comes down to your liability should the worst happen.
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If your debit card goes missing, your liability varies based on when you report it to your bank. If you phone it in immediately, before any unauthorized charges are made, you’re responsible for $0. Within two business days, that jumps to $50. More than two days but within 60 days? $500. Wait longer than that and you could be out every dollar in the accounts linked to the card. Yikes.
3. Credit cards offer better benefits and protections
Debit and credit cards look a lot alike, don’t they? They’re both rectangular, often plastic, and feature your name and a series of numbers. But that’s where the similarities end. Remember, debit cards allow you to access money in the bank accounts they’re linked to. But credit cards draw on a line of credit that’s borrowed from the card’s issuer — you spend against the limit and then pay it back.
It’s that difference that makes me prefer using credit cards. For starters, repaying my credit card issuers on time every month keeps my credit score in good shape — payment history accounts for a whopping 35% of a FICO® Score, so making those on-time payments is absolutely worth it for that benefit. Plus, I earn rewards on my spending with a credit card — debit card rewards are rare and I don’t have an account that offers them.
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In addition to building credit, credit cards come with better consumer protections than debit cards. Unlike debit cards, with the best credit cards, my liability for fraudulent purchases is $0, regardless of when I report the theft of my card or any unauthorized charges. And if I were to have a problem with a purchase I made with my credit card (say, an item I ordered online never arrived and the seller was unwilling to refund my payment or send a replacement), I could dispute the charge with my card issuer.
Ultimately, leaving my debit card at home most of the time works for my finances, and I’m not alone. I recommend considering your own spending habits and making a decision that works for you.
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