I’ve encountered many people, both in my personal life and online, that insist upon using a debit card for their purchases, instead of using a credit card — either because they don’t yet have one, or because they have some fear of using a credit card. There are literally no cons to using a credit card if, and here’s the catch, you’re responsible. That’s all. There are so many pros built in to using a credit card over a debit card. Here are a few:
It’s safer! When you use a debit card to make a purchase, you’re essentially handing the merchant direct access to your bank account. Should the waitress at the restaurant you’re eating at write down your debit card number or should your favorite grocery store experience a breach, that’s direct access to your account and your money. Yeah you can file a fraud dispute with your bank and get your money back eventually, but in the meantime, that money is poof, gone.
Compare this to using a credit card – when you do this, you’re using the creditor’s money to make your purchase and you don’t have to pay it until your statement closes. You have a 30 day window in between payments to make sure that all purchases on your card are yours. And if there’s a purchase you didn’t make, that’s not your money missing.
It builds your credit. When you use a credit card RESPONSIBLY, it will build your credit over time. Which if you’re young may not be a big deal to you, but eventually you might want to buy a car or house, and unless you have a lump sum sitting in cash, you’re going to need to finance it. Low interest loans are granted to people with good credit scores, meaning you pay the bank less in interest to use their money. Compared to someone with poor credit who will either get a high interest loan or no loan at all.
The caveat here is that you never miss a payment. EVER. A good rule of thumb is to only spend on credit what you can pay cash for at the same time. You should never buy something on credit that you couldn’t otherwise afford at that same point in time with your debit card.
Purchase protection. A lot of major credit card companies (like American Express and Discover) offer a suite of purchase protection features. This is especially useful when you buy big ticket items (like a flat screen TV or laptop, for example), because it adds a layer of protection to you, the consumer. Some features are:
- Accidental damage coverage – if you break your device in the first couple months of owning it, you can get it replaced by your credit card company.
- Better price guarantee – just bought an expensive item but found a better deal somewhere else? The credit card company will cover the difference.
- Theft protection – if your item is stolen within the first few months of owning it, your credit card company will replace it for you
- Extended warranty – all my credit cards offer 100% of the manufacturer’s original warranty on any purchase. 1 year manufacturer’s warranty on my iPhone becomes a 2 year warranty including the extra year of coverage from the credit card company.
And many more.
The credit card company will reward you for using it. Most credit cards offer points or cash back that you earn every time you swipe your card on things you’d already be buying anyways. Same applies for paying bills. So by using a credit card, you can get a percentage of cash back or points that you can redeem later or put towards a purchase or vacation/trip.
Some tips on using a credit card:
- NEVER miss a payment. EVER. You will destroy your credit with as little as one missed payment.
- Only buy on a credit card what you can afford to buy on a debit card at the same point in time. This is how people end up with $1,000s in credit card debt – because they use their card irresponsibly and then can’t afford the payments. Being responsible is the only thing it takes to use a credit card.
- Pay in full – only suckers make the minimum payments. When you only pay the minimum each month, the credit card companies will charge you interest for using their money longer than the 30 day statement period. Whatever you heard about making the minimum payment to boost your credit score is false. Paying your card off in full achieves the same score improvements.
Hopefully this post is enough to convince you to make the move to responsible spending with a credit card. They’re awesome financial tools to build your credit and build your future as a responsible adult, and all it takes is responsibility and self control now.
Here’s a success story for you now that you’ve gotten through this post. A couple months ago my credit card number was skimmed and used several states away from me. The purchase was at a small convenience mart and was only a few dollars, as the thief was likely testing the card to make sure it works. My bank notified me immediately of the fraud alert. All I had to do was say it wasn’t me who made the charge and it disappeared. Never had to deal with it again. Granted, a couple bucks didn’t do any harm to me, but had that been a purchase of $1000 or more, that would have stung if it was my debit card that made the purchase.
I applied for my first credit card the day I turned 18. I now have four credit cards with $48,000 in available open credit across them and a credit score of 780 at age 23. All it took was a little persistence and responsibility. If I can do it, believe me, so can you.