The Rise of Debit Cards
Can this be the U.S.? Visa is reporting that in 2008, American consumers spent more using debit cards than they did with credit cards.
Mr. ToughMoneyLove is pleasantly surprised. Shocked might be a better word.
The credit card fans are likely aghast at this news. These poor debit card users are missing out on the rewards, the extended warranties, blah blah blah. A lot of good those rewards and extended warranties did when the recession caused layoffs and other financial crises for those carrying balances on their cards.
Fraud protection is another feature used to promote the use of credit cards. The article I linked to mentions that specifically. I don’t think that argument carries the day.
By law, credit card holders are limited to $50 liability for unauthorized transactions. That law doesn’t apply in the same way to debit cards. It can be harder, the credit card advocates say, to get your money back.
That’s not true, if you pick the right bank. Many banks provide the same or better fraud protection to users of their debit cards. I have had experience with that myself. Our bank allows their debit card customers to dispute transactions in the same way that credit card users can.
Some folks are concerned about using debit cards for online transactions because in the case of a stolen account number, an entire bank account can be wiped out. First, don’t do business with a bank that would permit this to happen to your account without recourse. Second, if you are really nervous about this, use a firewall account for your online transactions. Open a debit card account at your bank that is different from your primary account. Make it easy to transfer money into that account. When you want to make an online transaction, transfer enough money into that account to cover the transaction. Very simple.
Is that more complicated than using a credit card? Perhaps a little. But look at it this way. You won’t be sending a credit card payment later and you will know where you stand financially at all times, in real time. There is one more significant benefit from adding a little complexity to an online spending transaction. While you are considering that extra step, you might decide not to spend the money at all.
Have any of you decreased credit card usage in favor of debit cards?