Apr 22, 2012

Why I Stopped Using Debit Cards and So Should You

Dave Ramsey wails on credit cards, barking at listeners to ditch them in favor of cold cash or debit cards.  I understand his reasons and agree American households often don't restrain, becoming financial slaves to swipes-gone-wild.  

However, in the last year, I've come to the conclusion Dave's flat wrong on cards.  Here's why.

Alberta Clipper
Awhile back, a greasy perp' stole my debit card number, cut a fake card and used it to fill fuel tanks on his big rig.  Like an Alberta clipper, the thirsty 18-wheeler stormed across Canada, snorting diesel siphoned from my checking account. 

Debit card safely in my wallet, I was unaware the checking account was having its blood sucked by a rogue semi 2,500 miles away.  Each illegal swipe drank cash to the tune of several hundred bucks per fill-up.  The scumbag used my account at three gas stations before I was tipped off.  He'd stolen over $1,500 before we caught on.

Thankfully, my bank's anti-theft software sniffed an intruder.  Computers track the location of debit card use, sounding the klaxon when the same account is used in two geographically disparate locations at the same time.  I swiped my card for a ham sandwich in Iowa as the same account was refueling a Peterbilt in Canada.  

The banker called me up for a short chat:

     "Beard, did you use your debit card today to purchase fuel from a Shell station in Canada?"

     "Nope, I purchased a ham and Swiss with my card in Iowa."

     "Well, we believe your card's been compromised, so we're freezing your checking account immediately."

Oh crap.

It was a mess for a couple days, unable to withdraw any cash until the bank lifted the freeze and issued a new number and card.  The money stolen from my account was gone, so I had to submit pages of paperwork to convince the bank to deposit the funds back in.  

How did my account number get hacked?  I suspect it was stolen somehow when I used it at a gas station.  So I dropped a roundhouse on a pretend paper debit card from my daughter's stash and vowed never to use one again.





Debit deceased, better boot up the credit card.

Credit Cards Aren't so Bad
Note: Credit cards only work if you pay them off each month.  If you're unable to do this, skip this section, flee from credit and use cash instead. 

I missed the convenience of the debit card.  It allowed me to keep few greenbacks on hand and instead plasti-swipe groceries, gas and new pants after splitting them on karate kicks.  So I dusted off the credit card and began using it instead.  

The Visa offers speedy convenience, with more protection than debit.  If a sneaky trucker stole my credit card, the anti-theft software would still kick in and alert the bank, but the money would not be pulled directly from my account.  With credit, there's a cushion between charge and payment. 

Always use a credit card for online purchases, never a debit card.  If that creepy porcelain elephant you ordered online never arrives, but the merchant charged your card, you're screwed if you used a debit card.  But a credit card company will go to bat and fight the shady merchant on your behalf. 

Credit card extra credit:  Use a card that pays back a percentage of your purchases.  I do this and get a check from Visa for $500 each year.  Visa hates consumers that pay in full and get cash back. 

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What do you think about the cash/credit/debit debate?  Is Beard wrong and Ramsey right in saying not touch credit cards?


-Beard
 
 

85 comments:

  1. Don't forget the killer rewards points!

    I think a lot of people (myself included) have been wary of credit cards at one time or another because of the ease with which you can rack up insurmountable debt. Unfortunately, this usually happens when you don't have A) the means to pay off the charges or B) the discipline to make timely monthly payments. I would argue that credit cards are the way to go only for those who can hold themselves accountable--financially and otherwise--for the shopping benders that look so tempting when the payment isn't due upon purchase. Like cash, debit only works if you have the money right there at the time of purchase, so it can dissuade you from making unwise purchases by taking into account how much it would suck to get your card declined at the register. For me, I'm just easing back into credit card use having learned my lesson the hard way. Thanks for a great post, as always!

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    1. Reward points, FTW!

      I was a big fan of debit cards for years for exactly the reasons you state: knowing that you must have the money in your checking account at the time of purchase can deter from making big purchases that we really don't need or afford right now.

      Through the aging process and maturity, I've built up a better resistance to the "gotta have it" syndrome. I now have the self-control needed to use a credit card for all day-to-day and big-ticket purchases.

      Credit cards may not be a real good idea for fresh college grads, I'd probably recommend cash for them until they build up savings and ensure they have the willpower to restrain on the plastic.

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  2. I'm a Ramsey follower but certainly understand your side of the story. I'm all debit card and haven't swiped a credit card in nearly 3 years. There's just something anxiety-inducing about paying for something and then owing monies, even if the payment lapse is just for a day or so on the credit card. Plus, I think credit card companies (and the big box retailers that push them on us) are kind of evil.

    I'm guessing that I'll be on the debit card side of this argument until some weasel steals my number and goes on a spending spree. Yikes. I shudder just to think of it.

    Great post. I love this topic.

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    1. There's something refreshing about a debit swipe compared to a credit swipe, knowing the debit transaction is complete and the money taken out at that time rather than waiting for fat credit card bill to arrive in 30 days.

      However, having my debit # stolen and the hassle to get the checking account unlocked and the boosted money deposited back in was enough proof that debit cards can be incredibly dangerous. While credit requires responsible use, you can literally have your entire checking account wiped out in one day with a stolen debit card.

      So credit or cash for me. :-)

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    2. Anonymous4/23/2012

      I agree with Emily. Even before Dave Ramsey, I had horrible anxiety related to CC purchases. Now that my husband and I have done Dave Ramsey, I'm 100% debit card or cash.

      Stephanie

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  3. Stephanie4/22/2012

    I thought I was afforded the same protections as a Visa cardholder if I use my Visa debit card as a credit card (signature instead of PIN.) Got a cardholder agreement and everything. Yes, unauthorized use zaps real funds, but they should be replaced just the same as unauthorized transactions on a Visa credit account. Maybe I'm missing something?

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    1. Correct, there are protections on stolen debit and credit cards. The difference is in timing.

      With a compromised debit card, your checking account is spanked right there, the money is gone, stolen, poof, bye bye. The bank then freezes your account, so even if there's money left, you can't take out any until they thaw it. Then you have to work with the bank to unfreeze the account and file a pile of papers to get your stolen money put back in. I was literally unable to take money out of my checking account for 3 days. That leaves a sick feeling in your stomach.

      With a stolen credit card, you have a buffer there, no money is actually taken out of your account, and you have 30 days before the illicit transactions on your account will even show up as due. So you've got some time there to work with the credit company to reverse the charges, and your checking account remains unharmed.

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    2. Not my credit union. When my Visa debit card number was swiped, I still had access to the funds in my account, just not with the compromised card number. My husband's card was still usable, and I could transfer online or withdraw money in person. It only took about 48 hours to have the stolen funds credited to the account and I did not have to submit any paperwork.

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  4. LauraC4/22/2012

    I stopped using a debit card years and years ago, it's credit all the way, for the same reasons you outlined (but never had my number stolen). My husband and I have had some shady transactions a couple times over the years, and we've never paid a dime because of them. CC company figures it out, reverses the charges, and we're done. It is a pain to switch the number for auto-charging things, but better that than actual money stolen! We don't pay interest and get around $400 every year back. Not sure I understand about the anxiety mentioned by Emily simply because we all use electricity and water over the month, so we "owe", but everyone just pays their water/electric bills monthly when they arrive, it's not like it's "debt". Same with the credit card. It's not debt if you pay a bill when you get it! Oops, didn't mean to write so much!

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    1. I agree. Credit cards require prudent use, else you end up in debt real quick. Once we learn to master willpower, purchase within our means, and pay it off each month, credit cards are a win for the protection they offer and the nice cash back we can get each year.

      I'd argue that used wisely, a credit card is safer than even cash. And you are giving up hundreds in cash-back rewards by not using a card.

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  5. We've had our debit card number swiped at least twice and our CC number swiped 3 times (we do a lot of online purchasing I guess). In the 2 bank cases it was a hassle and a half and we were without funds until it was settled (they drained the entire checking account one time which must have been disappointing since there wasn't much in there..haha). The CC was a much easier process and because they didn't have direct access to my money we were in less of a bind. We pay it off every month never fail and make sure that we don't spend beyond what we can pay off (basically follow the set budget for the month). So, totally not evil in our book:)

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    1. You described the debit card risk better than I did...d-cards are tied directly to a checking account, while c-cards are not tied directly to any bank account. This layer of protection with credit cards is key in situations where your number is boosted and the punk is DIRECTLY frying your checking account with the debit card.

      Thanks for reading and commenting!

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  6. First, I just wanted to say that I really enjoy reading your blog! I am originally from Iowa, so I feel very at home reading some of your posts:) Second, I loved this post, especially the part about Visa hating certain people. My husband and I often joke that Chase has to despise us, because we get cash back as often as possible, and have yet to pay a cent of interest. Take that credit card companies!!:)

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    1. Raise your glass and toast to ticking off the credit card co's! ;-)

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  7. I have never agreed with Dave R's stand on credit cards. My biggest problem is that by blaming credit cards, he's negating people's personal responsibility. Credit cards are not evil. If someone cannot use them responsibly, then need to accept and admit that and not use them. The rest of us shouldn't be branded as evil or stupid for others inability to manage credit.

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    1. While I agree with most of Dave's money approaches, he's all wet on this debit/credit thing. Sure, if a family racks up a huge credit bill due to sugar-aided hyper spending sprees, they should go ahead and cut up the card. But for responsible spenders, c-cards offer far better protection than d-cards.

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  8. There's this thing called Cash...and it's a really simple system, accepted everywhere. The problem with credit cards is the reality that most people either cannot pay them off in a month, or do not have the restraint when it comes to easy spending and will not be able to pay them off in a month. Debit cards can easily be compromised these days. Mine has been compromised twice and I rarely use it (only in those times when I don't have cash etc.). So I still stick to a monthly cash allowance system that just proves itself time and time again to be safest (pending I don't get my big old purse stolen) and best at keeping budget. There's my two cents - in cash.

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    1. There's this thing called Responsibility. It's a really simple concept that most people understand. ;)

      Aside from that, I get tired of hearing the "most people" meme. No one seems to know who these "most people" are or be able to actually document them; yet are they are used time and again as the reason that responsible people should stop using credit cards .. as though it was the fault of the credit cards and not the people using them.

      And finally, there are a lot of things that you can't do with cash ... or at the very least not easily. Renting a car. Buying online. Making all kinds of travel arrangements and reservations. Buying gas at the pump. Etc.

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    2. Anonymous4/22/2012

      Bravo Kara, bravo - I couldn't agree with you (and Beard) more. Responsibility is absolutely key here.

      I have just one credit card. I use it heavily for just about everything - groceries, gas, trips to Target, etc. But I consider myself frugal (clearance aisle, coupons, never pay full price for much of anything) and do not live anywhere above my means. I also pay in-full each month. Whatever I charge now, I already have the funds for. With a generous cash-back bonus program, I come close to being able to making an entire mortgage payment at the expense of the credit card company. :) Makes me happy every year when I'm able to apply the $ to do that.

      Discipline and commitment are a huge part of making this work, but it's not all that difficult either. I also was raised to never commit to something where you couldn't realistically meet the obligations. You never want to be the slave to the system. Credit card histories are also a solid way to prove that you can be responsible and are worth a loan, should you ever need one.

      I'm NOT an advocate of holding too many cards though - what's the point? Hence, why I have just one.

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    3. @Katelyn - I'd say that cash is safer than a debit card, but my opinion is a credit card used wisely trumps them all. A credit card can be used online, cash usually can't. Plus, I'd be giving up hundreds of dollars per year in cash-back rewards if I made all my purchases with Ben Franklins rather than plastic. Carrying around a bunch of cash in your wallet or purse is unsafe, I usually keep only $40 on me and use the credit card for just about everything.

      @Kara - Amen, sister.

      @Anon - Responsible use of credit cards allow smart consumers to punch credit card companies directly in the balls. Pay in full each month, no interest payments, and Visa/MasterCard/Discover cuts us a healthy check each year. Add in the protection offered by credit and it seems like a no-brainer to me.

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    4. We use our credit cards all most exclusively. We rarely carry cash, and don't carry our debit card with us unless we have to have it. Had my purse stolen one time... it involved a fallen old lady and some pretty ingenius thieves. You can't get cash back... closing checking accounts and fighting bounced checks from closed accounts to pizza places and cell phone companies has been a nightmare.

      We pay our credit cards each month and love the automatic discounts on gas and things our Discover gives us. Plus the cash back is so nice. We are Dave Ramsey fans (I had cash in my purse when it was stolen from his envelope system) and have been working our way to our goal of being debt free. I understand why he uses the cash system - but we look at each purchase on our credit card as immediate cash out. Staying within our budget and not letting balances carry over. I get hat using the cash system works great in teaching people where their money goes, but after the lesson is learned - using credit is so much safer and the bonus cash back seems silly to not take.

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    5. Our debt is mortgage and my husbands medical school loans - not consumer debt. Just to clarify.

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    6. @Nessa - I had my wallet stolen a couple years back, so I too am gun-shy about keeping a wad of green in my right back pocket. If used responsibly, credit cards offer far greater security than debit or cash.

      Did you end up cold-clocking that old lady for scheming you?

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  9. I love Dave Ramsey! Love love love him. I do not have a credit card thanks to the spendthrift ways of my youth I have decided to go all cash. Debit card lives in a double top secret location at home. My emergency is fully funded and I am all about the envelope system. Nerd Alert! I think Dave's course should be mandatory for high school students.

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    1. How do you make online purchases without a credit card?

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    2. Visa gift cards purchased with cash:) I know I sound like an old lady who stashes all her cash under her mattress.

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    3. I super agree with you, Amber. We do the same thing in our home, and I also believe this should be taught in schools!

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    4. Double agree with Amber and kt...why don't high schools require students to take basic financial classes in school?

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  10. Dave Ramsey is responsible for a pretty hefty financial turn-around at our house. At my insistence, my husband and I bought a big old fixer-upper 4 years ago. It needed a lot more fixing up than we'd bargained on, and we had to take out a second loan to do some of the work. We then had trouble paying our monthly bills, and I began to rely on a credit card just to get us through the month. It was awful. God was gracious to us, and we were able to sell the house and aggressively start paying off debt. We just don't use credit cards any more because we like the accountability of cash & debit cards. That said, your reasons are compelling and may prompt some discussion in our household. My mother-in-law experienced some pretty comprehensive identity theft that took a LONG time to dig out of, and I am just not up for that. If a credit card gives us some more protection, I'll consider it!

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    1. I agree that perhaps your family should shy away from credit for awhile. Please be careful with the debit card, I wouldn't use it for any online purchases.

      Thanks for being honest with your assessment and taking responsibility. Best of luck! :-)

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  11. I'm a huge Dave follower and have bought in to his teachings to the extent of using Zander to buy life insurance and am debt-free except the house. But, I cannot agree with his stance on credit cards. The rewards are too nice (and free), the protection is great (and has been used half-dozen+ times due to ebay/online sales), and since I'm not a fool I've never carried a balance from age 18-31.

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    1. Agree and agree. Here's to a solid running season for you, thanks for stopping by.

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  12. We ONLY use credit cards in our house. I honestly have not used my debit card except at the ATM in oh... 4 years or so. I understand why some people shy away from them, but they are only a threat to those people who can't control, or don't keep track of, their spending. We charge all of our monthly expenses and as many bills as we can to our card (we have 2 cards, and we switch off using them - so we'll use one for a few months then switch to the other, so we only have one card to pay off each month), then pay them off as soon as the statement is issued. Actually, we're heading to Hawaii in a couple weeks (so excited!), paid for completely by hotel points and air miles earned through our credit cards. We have to pay a $10 convenience charge for each of our flights, and like $30 a day for the resort fee at the hotel. So all in all, our trip will cost us about $200. Not too shabby, and all because we switched to credit cards. Why not use a method of payment that pays YOU?

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    1. When I hit the publish button on the post today, I expected any comments trickling in to be of this nature:

      "Beard, you're an idiot for supporting credit cards. And your karate is weak, get a life."

      So I'm sitting here shaking my head, surprised readers are mostly agreeing with my angle.

      Bravo on the free trip to Hawaii, excellent! The credit card companies surely despise you.

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    2. Anonymous5/25/2013

      Your karate is weak ,,, but your an idiot for supporting cards ,, have fun putting small business out of work yuppy..

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    3. Good luck with that cash thing for online payments.

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  13. Anonymous4/22/2012

    I think you need to know yourself HONESTLY, and know the "ins and outs" of your cards in full. It depends on the type of spender/payer you are as to which card suits you better. They each have pros and cons, but you need to pick the one that will best suit you. I think credit cards are a very dangerous temptation for people who are not able to be mindful that they don't have the money available today. Also, in Australia, a credit card in your name can be a much larger debt than you think. If you apply for a home loan, the bank will apply the limit of the credit card to your monthly expenses, even if it has a $0 balance. They will multiply it by whatever their calculation % is to work out if you can service an additional loan.( EG: if your limit is $2000, they will multiply that by 12months for your annual expenditure and then take 20% as your monthly committment hence $4800!!) Which may or may not be accurate, but will largely effect your monthly disposable income for servicing ability.Definitely one to think about though, and there is always the good old days of cash. You know what you have, what you are spending & when you will get some more. Although, I don't like to carry cash around, sometimes to my detriment, when I just want a loaf of bread & cant scrape a few bucks together! Angela.

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    1. Agree, it would be a mistake for me to say something like "everybody should use a credit card." There are situations and people for which credit cards don't work and only cash should be used.

      If I understand the Aussie loan game you are describing, doesn't that just bump up the maximum amount the bank is willing to loan you for a home? If so, don't play that game and only mortgage within your means. U.S. banks played a similar game for years, allowing consumers to borrow above their means. People unwisely played along, got in over their heads and contributed to the catastrophic financial meltdown of 2008.

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    2. No, what I was trying to explain decreases the amount the bank is willing to lend you because it looks like you can't afford it. They attribute the maximum amount of your credit card limit plus some ,as a regular expense. So they take that figure off what you have available to pay back the loan, therefore think you can't afford to borrow as much. It can really hurt those first trying to get into the mortgage market since it's not an accurate reflection of their budget. Further to your comment regarding the banking collapse 2008 in U.S. - Aussie banks/govt took that one as a lesson and implemented some pretty strict rules to tighten up our finance industry. Our Govt. also 100% backed some banks for 3years to build consumers confidences in those that were doing the right thing. We did have some going down the path of allowing borrowing above their means, but once these measures were put in place they swiftly went out of business. Sadly though, some consumers did lose everything as did the U.S. citizens.

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    3. Got it, thanks for explaining how the banks work mortgages down under. Seems there would be an incentive to secure a credit card with a low limit so you don't get dinged when house shopping.

      I'd personally never purchase a home anywhere close to the max a bank would loan me, in the US, they generally let you go hog wild and purchase well above your means. They've gotten a bit tighter since 2008, but I still see people in over their heads on loan payments.

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  14. Great point. We use debit cards but we also do a lot of online purchasing so this gives me pause now. We don't have any consumer debt, and we mostly always paid off our balance when we did have a credit card, so maybe we should look into the safety aspect of that. Hmmmm, some research ahead.

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    1. I've had a few friends that were strictly debit card users, have their debit card numbers stolen after shopping on the internet. Some of them got most or all of their money back, but there were a few that had to foot the bill because they couldn't prove it wasn't them. (even though the merchandise was sent to a different address) I advise everyone I know to at least have one credit card of online purchases because the protection for unauthorized purchases is better with the credit card.

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    2. Cedes, you offer sound advice. NEVER USE A DEBIT CARD FOR ANY ONLINE PURCHASE, PERIOD.

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  15. I have about £0.76 in my bank account and it's been like that for at least 6 months. Not in relation to anything really - but if anyone were to steal my details they'd be disappointed and I'd probably feel embarrassed and issue them a letter of apology...

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    1. Ha, a burglar would feel like he got ripped off if he jacked with your account!

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  16. Anonymous4/23/2012

    ive had my debit card # compromised before & they didnt freeze my account. they canceled my debit card, but i was still able to w/draw funds via ATM, write checks & w/draw from a branch. i found out about the debit breach on a saturday & they had a new card fed-exed to me by 10am monday morning. they also took care of all the paperwork to get the funds back. all i had to do was stop by my local branch to sign three pages & the funds were back in my account (it was less than $200, because the attempted transactions were also canada & my bank has a no foreign country policy, unless a call is made by the card holder prior, it was cut off right away) by monday night. so, it might just be a matter of what bank you bank at. my bank is local to the state of ND & member owned. not sure if that makes a difference or not. i also worked there many moons ago. the only downfall is that they are so theft conscious that i have to remember to call them before i go to my house in AZ or they freak out if suddenly they see transactions coming through from some place other than my "home territory". i havent used a credit card in probably.....9 yrs? maybe 10. i have them obviously for emergencies & my credit rating is 805 w/out them so i dont see the point. hopefully that doesnt come back to bite me...

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    1. How were you able to withdraw funds from an ATM if they canceled your debit card? Unless you mean you were unable to withdraw until your new card arrived.

      Imagine being 1,000 miles from home on vacation when your debit card is compromised, and the punk completely drains your checking account. In this situation, if your debit card is the primary means by which you pay for food and adventure on the trip, the vacation would turn sour real quick. Sure, you should get the money deposited back into your account a few days later once cleared with the bank, but it would certainly deflate that relaxing holiday.

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  17. One thing I never understand in the US when I visit is the lack of chip and pin. In the UK and Europe you have to enter a 4 digit pin number for all transactions not just cash from the machine, it doesnt solve the issue of having funds returned if they did get your pin numbe. It does add a layer of protection that you dont get with just signing for things.

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    1. U.S. merchants typically require a PIN number when you use a debit card. Credit cards require a signature. Seems that the person must have stolen my account number and PIN number, no idea how they did that. Unless they were using it at shady gas stations that accepted the card number without a PIN.

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  18. Credit cards are great if you are responsible with your spending and pay them off each month. And the rewards you can get with some of them are FANTASTIC! (I've been able to complete a lot of my home renovations with Home Depot gift cards purchased with rewards points!)

    But, I do understand Dave Ramsey's reasoning when he tells those in financial ruin to cut up the credit cards and go strictly cash or debit, because with cash, when the money is gone, the money is gone. You can't spend what you don't have! There are even pitfalls with that debit card because of overdraft fees if you aren't responsible enough to watch your account balance.

    Some people just see being in debt as a way of life. Personally, I can't stand it!

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    1. Debt is a ruthless taskmaster, I flee from it and want no part in crossing paths. I'd rather withhold and yearn for something I can't afford than purchase the item now on credit and end up paying a large amount of interest on a Visa.

      There's something very satisfying about patiently saving up for an item and only pulling the trigger when you can pay for it in full up front. Often, by the time we save up and can afford it, we've lost interest and no longer wish to buy it. This is a good thing.

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  19. Anonymous4/23/2012

    My cube mate came to work outraged one day with a story that his 16 year old daughter (and the other students in her class) were being encouraged by a teacher to obtain a gas station credit card in order to begin "building credit". I was flabergasted as to why a teacher would think 16 year olds needed to be concerened with this subject yet. And college kids arent mature enough most of the time to handle credit much less high school students. .
    Enjoy the blog- thank you for sharing.

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    1. Agree, high school kids and most college students should not have a MasterCard in their pants.

      I need to do some research to determine the accuracy of this statement:

      "Young adults should secure a credit card early to build their credit rating."

      There's possibly some truth to that if the credit card is payed in full each month, but I could see it having the opposite impact and hurting the credit score if a balance lingers each month. I'll dig on this and find the answer.

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  20. Nope, I'm with you Beard. My husband and I have always used our credit card (and paid it off monthly) for all of our expenses. We treat it like our debit card and track it the same way. We've had our number comprimised before but like you said the company always contacts us asap and it's never been a hiccup for us at all. We also LOVE that we get rewards, so much so that we will go out of our way to pay large purchases with it.

    My father in law is an accountant and taught my husband and his two brothers how to manage their money but signing them all up for credit cards at age 16 (joint accounts). This approach is not right for everyone (at all) but he made them keep every receipt and track it using Quicken (which all 3 of the boys still do). By starting them off early (with A LOT of parental oversight) he taught them all financial responsibility and for that I am SO thankful.

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    1. That's how you do it right, both you/hubby and your father-in-law.

      Hope I do it right with my kid and get her trained on a smart financial path, since poor money management haunts people for years/decades.

      Can I send Pigtails to your father-in-law for financial boot-camp when she's 16? :-)

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  21. Anonymous4/23/2012

    I agree w/you, Beard. I pay off my card each month and am saving every loose penny to pay cash for a replacement for my 13 year old truck. Every cent from scrap metal, every consignment shop or craiglist sale I make, every cash bonus check I get from using the card, all goes into my "replacement vehicle" fund. My only debt is my mortgage. I use my card only for VERY necessary purchases. For me, keeping my goal in mind is the motivation I need to spend (or not to), responsibly. Joanie

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    1. What truck you looking at: Ford, Chevy, Dodge, Toyota, Honda or Nissan? I wish a manufacturer would build a small turbo diesel pick-up, similar to the scrappy diesel Toyotas of the 1980s.

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  22. I don't have the discipline quite yet to use only a credit card and pay it off each month. I have learned the lesson about credit the hard way - I imagine Dave Ramsey's audience might have similar issues :)
    But, you have made me re-think how often I use my debit card. I may just have to switch back to cold hard cash!

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    1. Honesty is the first step to responsible spending and saving. Sounds like you are on the right road to making it work, keep at it!

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  23. Don't forget, too, that the three major credit bureaus also want you to play the credit card game.

    Four years ago, my wife and I consoldated a bunch of debt that we'd had sitting around collecting dust (but not interest), gathered our gumption, and paid the whole thing off in 13 months. We gleefully cut up all kinds of credit cards--furniture stores, Lowes, etc.--and didn't look back...

    ...until we decided to re-fi our mortgage and take advantage of the ridiculously low 15 year rates. As it turns out, cancelling all those lines of credit dinged our credit score--which in turn (slightly) affected our ability to nab the lowest interest rate.

    "Get a credit card, put your gas purchases on it, pay it off each month," was the advice of our loan officer. We did. It's helped. I know Dave Ramsey, bless his heart, has good intentions, but I don't know many people who are able to avoid taking out a mortgage, and the credit card advice could do them a disservice when it comes to finance.

    ReplyDelete
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    1. Gosh darn it, everybody's got their tentacles dangling in the game.

      Did you cancel those cards before you cut them up? I believe having old cards open with no activity on them for years does not help your credit, but you're the first I've heard say closing old credit accounts lowered your score.

      I think it's good to have ONE active credit card open all the time that pays cash back. Use it wisely and pay in full each month.

      Delete
    2. Yes sir. Cancelled every one.

      Here's the thing--I think most people associate good credit, or at least basic credit-worthiness, as reflective of their moral lifestyle. People with bad credit are shady. People with no credit are shadier, because they have to buy their cars from super-shady (no rap pun intended) car salesmen.

      But your credit score has nothing to do with your worth as a person. The credit game is just a game. Banks are designed to make money. Your credit score (such a tricky, competitive term, isn't it?) is simply a margin to determine how much you can help the bank make money. That's it. I'm not saying it's inherently bad (we're capitalisits, right?), but I think people often take their credit scores personally, and since just about every American has to play the game at some point and borrow money, it makes us susceptible to the judgment that comes with it.

      Delete
    3. Good points there, thanks for replying.

      I tolerate and partake in the credit game to the degree that the banks consider me a "safe risk", so I don't get hassled if I need money for a house or car. I also know we can work over the CC companies by paying in full each month on a card that pays rewards. No interest fees, looks good on a credit report for the banks, plus Visa is paying us cash back. That's a win.

      Delete
  24. Anonymous4/23/2012

    I always have to bite my tongue when someone talks about what a great deal they got on something, only to find out that they carry a large credit card balance, presumably with high interest. I'm so tempted to point out that not only didn't they save $, they likely OVERpaid for that item. A lot of people lose sight of that fact - thinking big picture.

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    1. Ah yes, those sneaky coupons and "sales", I'll put up a post on this topic sometime. A coupon doesn't save us money if it sweet-talks us into purchasing crap we don't really need in the first place. And charging a "great deal" to a bloated card with a fat balance is doubly dumb.

      Delete
  25. It's good to have a long history of good credit, so I keep the first credit card I ever got open. I'm definitely pro-credit card. We have one that collects miles, and we completely live on this credit card, paying it off in full each month. We end up with 5 or 6 free flights a year. I only have a debit card for my personal money (not family money) and I keep that balance under $250, moving any surplus to my personal savings. I feel pretty safe with that. :)

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    1. Dang, 5 or 6 free flights a year (slow clapping). Well done!

      Delete
  26. My bank questions any point of sale on debit card out of state. I went to California had to notify my
    Bank I would be using it in California or they freeze the account.

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    1. CA is $$, I bet your debit card got a good workout in on that trip. Me want to visit there sometime, I'd hit ocean, mountains and desert for sure.

      Delete
  27. i'm with you 100%. my husband and i talk about it and have discussed if debit cards are better for us or not. i say- if we can pay it off every month, it's more of a benefit to us to be able to earn miles (ps- do people really use these things for miles?)/cash back/gift cards. so! we've been doing c.cards practically the whole time, and have been able to donate the money to charities, or purchase that 'one thing' we're saving up for a couple times. it's nice, because it is free for us since we pay it off on time.
    our biggest burden right now is- we had to buy a car and move at the same time... within a week our house should sell (aka. close) and then we'll finally have the funds to comfortably pay off the car. hated that monthly bill for two months. THAT's the thing that makes me uneasy.

    ReplyDelete
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    1. Your note about paying two mortgages for a couple months solidifies how I'd hate to be in the real estate market renting out houses, knowing I'd be on the hook for multiple mortgages regardless of whether or not they are occupied or decline in value.

      Delete
  28. I use a credit card for pay-at-the-pump gasoline and online purchases, but I use my debit card for everything else. I do not carry much cash; my purse was stolen a few years ago. I check my bank accounts regularly to ensure everything is accurate, and I am blessed to have a bank that is customer-service driven, not sales driven. :-)

    God Bless, Beard!

    ReplyDelete
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    1. I'm fairly certain my debit card number was ripped off at the pump, so I encourage debit card users to at least refrain from using them at unattended, high-traffic areas like self-swipe gas stations.

      Delete
  29. LauraC4/25/2012

    Don't know why I'd embarrass myself by admitting this, but I got my first CC (Discover) in college because they were offering - get this - king-sized candy bars if you applied. Yup, for a king-sized Snickers I got a credit card. The only non-humiliating thing about that is that I knew how money worked because I've never had cc debt, ever. But the thought of a king-sized candy bar holding that much sway, reminds me of how poor, thin, and *carefree* I was back then. Not that I'd go back, I'm very blessed with a beautiful family. But a king-sized candy bar would hold no influence over me now, and to think of how little responsibility I had as a 19/20 year-old makes me laugh!

    ReplyDelete
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    1. That's funny, I'd forgotten about the ridiculous freebie stuff the CC companies gave away to hungry college kids to entice them. I remember signing up for a card in school for a cheesy coozie, never did use the thing. Do credit card co's still bait college kids with crap?

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  30. Anonymous4/25/2012

    Yes, I remember these gimmicks from my days. Only it was a giant bag of M&Ms. They didn't sucker me in, but the students would just flock to 'em - free "food".

    ReplyDelete
  31. i have a chase visa debit card//i pay most of my bills at the beginning of each month.i know how much my satellite bill,internet bill rent bill,etc is ,so i pay them online before the due date in fact, days before i even get the bills in the mail.i get online,check what's in my account,pay the bills,it instantly reflects on my account and what doesn't reflect yet(bills that are withdrawn automatically)i 'pretend'that amount has already been deducted by penning on paper,the overall remaining amount as though it HAD been taken out already.i then know exactly what i have for the rest of the month on paper.i keep this 'record' in my wallet so that when i go anyplace,i deduct what i spend from that record and when i get home i create on paper another record of what i've spent and how much remains and then carry that new recorded amount with me when i go out anywhere.the process repeats itself everytime i come home after spending any amount at all/.i'm never behind or overdrawn/

    ReplyDelete
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    1. For bills, I wire the money directly via the bank. Slick, safe and no postage. Once you do online bill pay, you never go back to any other method, it simply works.

      Delete
  32. So I know this is weirdly late in the game to be commenting on this post, but I just re-discovered your blog (first looked at it via Younghouselove for your amazing kitchen reno). First off, I really love reading your posts!

    Second, I am a 22 year old first year graduate student, and made the switch to credit cards after a summer trip to Yellowstone when my debit card information was stolen and my bank account had payments for "Christianmingles.com" and "SeniorSingles.com" queued up on my withdrawals. Thankfully, USbank was really on the ball and froze the transactions before they were ever authorized, so I only had to wait a week for some forms, and things were just fine. It was enough to scare the crap out of me, though.

    When I was still using my debit card during college, however, I was really nervous about all of my money resting in my checking account, ripe for the taking, so I opened a savings account and kept my checking account under 1000 bucks at any given time. I checked my online banking like a hawk to make sure I never spent too much money.

    Since then, I have sworn by my credit card. I have always paid my bills on time and keep a zero balance every month. And even though I am single and don't have a ton of expenses, I have still racked up a couple hundred bucks in cash back rewards. Needless to say, I am in love. And one of my favorite things is that it helps me gauge how much I spend each month. I can even use Citibank's website to show me little graphs of what most of my spending is going toward: food, clothes, etc... It's a nice way to keep an eye on my budget without being too OCD.

    So I guess there's a little testimonial of a college-age student who isn't totally financially inept! There is hope, haha. It comes from having really smart and frugal parents. Sounds like your kid will some day have the same luck I have had :)

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  33. Anonymous5/25/2013

    I am a small business owner and can tell you that the 3 percent merchant fee's just kill us... $225 worth of merchant processing fees per month on average ...... And then they love to leave a tip on the card for my employees too. And I have to pay 3% of there tip... The Credit card paper is not free either ..... My point if you like doing business somewhere don't make them eat fees so you can get your yuppy reward airline miles .... Some days these fees make me feel like I am gonna go over the deep end(in a very bad way )

    ReplyDelete
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    1. Most businesses push that 3% transaction fee to their customers, so it's a non-issue for the owner. Cash doesn't work for online payments.

      Take it up with the CC companies, not your customers, dude.

      Delete
  34. Anonymous6/21/2013

    It is now legal for many states to charge credit card users surcharges. It has always been legal to offer a cash discount.

    It is not worth talking to the credit card companies about fees. The fees cannot be any cheaper unless reward programs end, interest rates greatly increase, and credit limits greatly decrease. People defaulting on credit card bills just as surely passes costs to everyone as writing bad checks does. That is why business can hire certegy or telecheck to guarantee all approved checks for the same price as credit card fees.

    Plus, a lot of people here forget that credit cards cannot be used for everything either. Winco, Aldi, and several other discount chains DO NOT take credit cards precisely because of fees. Most Farmer's markets and some restaurants also will not.

    For these, do you advocate visiting the bank to get cash every so often?

    I plan to continue using cash for most purchases and make special efforts to support business that charge credit card users more or ban credit cards.





    ReplyDelete
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    1. I keep a small amount of cash on hand for the rare business transactions that don't accept plastic. Otherwise, I do credit cards all the way. My balance be gone monthly, several hundred dollar cash rewards and all of my payments are summarized nicely on a monthly statement.

      I believe in making exchange of funds as easy and open as possible, even if there is a fee. Merchants pass the fee along, I'm willing to pay slightly higher prices for the convenience and protection. PayPal when selling Bento boxes on my blog. Sure there is a charge, but it's worth the convenience and protection for all parties.

      I do a lot of online transactions, cash doesn't work for that and credit cards offer a layer of protection. Also, the idea of carrying around a huge pile of money in my wallet doesn't sound like a safe alternative. I've had my wallet stolen before, been there done that and you don't want big cash strapped to your butt when that happens.

      Banning cards sounds like a bad idea. How would online transactions works?

      Delete
    2. Anonymous8/13/2013

      Strapped to your butt? By this, are you talking about carrying your wallet in your back pocket? I ABSOLUTELY NEVER would consider such a thing.

      I actually use a string to attach mine to a belt loop.

      I actually rarely carry much more than $100. I have very little need to make big purchases.

      If I had to withdraw a very large sum of cash, I would clip it very carefully in several different areas under my clothing.

      I do not understand the difficulty of keeping track of one's wallet and cash.

      As for robbery, the loss of a modest amount of cash is the least of one's problems. Losing a smartphone or jewelry would be worse. Not to mention extreme fear for one's life.

      I do very few online purchases. Sometimes, there is no choice. Otherwise, I do not understand the allure of them.

      I do not advocate making credit cards illegal, just supporting businesses that penalize or reject their use. I work at Target, and I like that team members must choose between credit card rewards and their team member discounts.



      Delete
  35. Anonymous7/13/2013

    Interesting post. I believe people should use whatever payment methods that work for them over time. Experiment. Try using one method for a few months, and then switch to another and evaluate which method is best for you and your family. (cash/debit/credit/some of the above/all of the above)

    My contribution here is that many of the risks of using debit cards sited here are somewhat overblown. (especially if you use a Visa debit card, and sign for your purchases like it was a credit card, instead of using your pin #)
    Check out the facts at: http://corporate.visa.com/_media/Visa-Debit-Card-Security-Fact-Sheet.pdf

    I personally use all forms of payment, but I use my debit card for most purchases, since it helps me spend less and stay on budget. This is what works for me.
    If and when I ever do encounter fraud, I have the backing of a credit union instead of a for-profit bank. (It makes a big difference!) My bank would not need to "freeze" my entire checking account, only cancel and replace my Visa debit card. (and return the stolen funds to my account within 3 business days) I am financially prepared to handle this inconvenience if this were to ever occur.

    The key to personal finance is living below your means, and saving a healthy percentage of your income every month. Be well.

    ReplyDelete

Thanks for the note, check back for my response!