Credit Cards vs. Check and Debit Cards: An Easy Choice?
Author: Nick
Category: Money
Topics: credit
The good-and-bad debate over credit cards seems to be the topic of the week on some personal finance websites I read. Mapgirl pointed me to the discussion at Get Rich Slowly in which J.D. confesses to carrying zero credit cards. Fortunately J.D. also points out that carrying a couple of rewards cards that you pay off monthly is okay.
Then I scrolled down and read some of the comments to J.D.’s advice and found someone who favors a “check card” over credit cards. The commenter seems to have had a bit of credit card debt history and recommends using a check card that draws from one’s personal checking account to prevent such an event from taking place.
This commenter has a good point: check and debit cards provide a way to carry plastic while avoiding the temptation of overspending. If you aren’t a very financially responsible person, and you’re not going to take steps to change that, then you probably shouldn’t be carrying credit cards. But if you’re a smart consumer who realizes that credit isn’t Latin for “free money,” are check cards really a better option than credit cards to help you stay financially secure? Absolutely, positively not!
It’s worth emphasizing this point in its own paragraph, so here it is: when you use credit cards, you are the only one who can financially destroy you; when you use check or debit cards, someone else can financially destroy you.
Such a bold statement, Nick! (I know–that’s what <b> HTML tags are for.) Allow me to explain what I mean by it.
If you’re a credit card user, you control its usage. You can choose to either use it responsibly–paying it off every month in full–or carelessly–letting balances grow endlessly and debt accumulate until there’s no turning back. Certainly someone else can use your card if they take it (or your card number) from you, but the law protects you from more than $50 in liability in those cases. If someone steals your credit card, it is a relatively simple matter for a smart card user like yourself to correct.
If you’re a check or debit card user, your checking account balance controls your card’s usage. Unless you want to incur severe overdraft fees, you’re not going to purchase more with your card than you have money in your checking account to cover. Sounds like a good alternative to a credit card… until you factor in “someone else.” If someone else takes your check card and gets ahold of your secret PIN number, they now have access to every penny in your checking account. With a single trip to an ATM machine, you can have all of your money (not a credit card company’s money) stolen in seconds. While most banks will refund your money in such an event, you may still encounter overdraft fees from purchases you make. Even worse, if you have checks written against this account, and those checks come in and see an empty checking account, they’re going to bounce. Then your creditors will take their red pens to your credit reports like it’s a failing history exam. Sure you may get your checking account money back, but those bad marks on your credit report won’t be going anywhere! So if someone steals your check card, you can have your checking account drained and credit ruined without a single mistake on your part.
There are many other reasons why I feel credit cards are a better choice than check cards, but the one I just demonstrated was the one that convinced me to ditch check cards a couple of years ago. While I never went through such an experience myself, I know someone else who did–an otherwise intelligent person whose check card theft still haunts her credit report to this very day.
So trade in that check card for a credit card that you’ll use responsibly; and when a card thief comes along, the only money he’ll be stealing from you will be the credit card company’s money.
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31 Responses »
1.
Jenn
May 18th, 2006 at 6:49 am
One of the hardest things for me about using my checkcard is remembering to TREAT IT like a check and keep track in a checkbook register. When I first graduated from college-uh, quite a while ago-I had a bad checkcard experience where I didnt keep track, then wrote some checks and had stuff bouncing around everywhere! I wound up taking out a signature loan (at a very low rate) to pay off all the fees as well as some credit card debt I had racked up (the interest on the loan was way less than on the credit cards). Let’s just say that I learned from the experience. . . .
2.
Jeremy
January 3rd, 2008 at 2:06 pm
My only real problem with debit cards is it’s harder to charge back bad charges and if you lose it, that’s instant money you lose till you get it back.
3.
Jake
March 28th, 2008 at 8:20 pm
I recently had my CC info stolen, and I had a charge on it which I never authorized. I simply contacted my credit card company via an online dispute form, and the next day they took the charge off my card and refunded my money. I suspect this would not be nearly as easy with a debit card. I will definitely stick with my credit card for that reason if nothing else.
4.
Jim
April 16th, 2008 at 9:46 am
We disagree. Credit card companies have replaced the local loan sharks. Human nature being what it is leads to mistakes. Missing or being late on just one payment will result in interest rates exceeding 30 percent. All you have to do is have your payment get mixed up in the mail or have a short term financial crisis like being fired and you are in trouble. Simply stated the misuse of credit cards and consumer debt is the number one cause of divorce in this country. Misuse of credit cards and money is also linked to domestic abuse as well. Last year credit card companies made more money on penalties and late fees then they did on interest. Your FICO score is debt score. My wealthty friends have FICO scores of zero and are proud of it. Pay off your cards and use cash. Get rid of your plastic. Credit card companies are the new loan sharks.
5.
Low Interest Credit
May 4th, 2009 at 10:12 pm
I think I’m going to switch my regular dealings with American companies to credit cards from now on – my mortgage payment wouldn’t bounce, but I forget that there isn’t the same protection overseas that there is with similar payment schemes in the UK.
With a credit card, at least I can claim back the money from the credit card company rather than whoever messed it up in the first place if need be.
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June 29th, 2009 at 12:35 pm
A credit card’s disadvantage is that, it becomes easy for us to use it and run up into a large balance. Then when it comes time to even pay partial payments it can be very difficult to make those payments. Add to that the finance charges and people with credit cards can run up large debts that they sometimes never recover from.
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Credit card if you use it wisely, it can be very useful. Just like when you need money in an emergency and you just don’t have any, there’s no doubt that credit cards can be a great help.
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July 10th, 2010 at 2:35 pm
I think the better way is via credit card and not check and debit cards.
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December 14th, 2011 at 1:08 pm
I don’t use credit cards however, I sense that I am missing out on cash and rewards on my monthly living expenses. Have looked at credit card vs. check card for point earning and it appears there is greater cash/reward for check cards due to limitations the credit cards have on expenses that earn points. Would like to hear from those that use credit/check cards for point earning and which ones are best.
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