Use credit card, it’s the card issuers that are on the hook for fraud. It’ll help you build credit. Use debit when you don’t have the means or credit history.
This sort of thinking misses the point that even with credit cards you don’t spend what you don’t have. You (ideally) treat it like a debit card. If I spend $100, then I’ve $100 less in my checking. If you do that, then “flush” never enters the equation.
I get some small amount of Amazon vouchers every month for doing this (£10/m or something like that), but really I do this for the fraud and chargeback protection.
I feel like this works well for us, but you have to be able to budget - if you're not capable of budgeting or find credit too alluring, then you're better off using a debit card.
But when that card statement balance comes due every month, it should make no difference because the cash was already deducted from my books when I made the charge.
A friend did all her banking in a single checking account. Her card was duplicated and completely wiped out. She filed with the bank for fraud charges. It took almost a week before most charges were wiped out. All the while she had literally no money to eat, buy gas, etc. If that was a credit card, it wouldn't matter. She would still have all her money. She could easily just use a different line of credit, use cash, or use her debit card.
So paying a debit card gets you far less benefits and depending on viewpoint carries higher risks. But the benefit is you (sometimes) can't spend cash you do not have.
I don't fly much, so I dont feel the need to harvest points. I dont want my purchasing data picked up by any more companies than necessary (my bank & the vendor), and all the various chargeback and refund facilities offered by credit card companies are a bit less critical as Australia already has stronger consumer protection law around goods fit for purpose & refunds. Credit scores are not really a thing in Australia either, you are assessed on your current ability to service a loan rather your history. Defaults still show up & count against you, but 'building good credit' is again an American concept.
Credit cards are a product designed largely for the American market.
If you do have money, why do you need to borrow money you already have?
Classic mistake, using credit or specifically a credit card does not always mean you dont have the money.
> If you do have money, why do you need to borrow money you already have?
Do you have a mortgage? Do you also have any money in a bank account / savings / cash in your wallet? If so "why do you need to borrow money you already have"?
Indeed the mortgage example is even worse, because typically a morgage has interest paid whereas a credit card paid off within the month does not.
But if they accepted lightning payments, I would pay them in BTC.
("rewards" purposely in quotes since it's not really a reward, but amex/visa/mastercard want us to think it is - there's no free lunch)
Merchants are free to offer more reward points or discount coupons for cash payments, though.
* Never pay anything in the way of fees or interest, including international fees.
* Never have a positive balance sitting in a transaction account earning zero interest (or as Americans would say, checking account).
* Never worry about overdrawing my transaction account.
* Card authorisations don't deprive me of my own money (eg hotel security bond).
* Importantly, in the event of fraudulent use of the card, the bank wears the damage while an investigation is underway.
A debit card might tick the first item on this list, but not the rest.
I've had two debit cards from two different large banks skimmed in the last five years, and both times the banks took care of it instantly.
I think the whole "no coverage if you use debit" notion is many years out of date.
With credit card fraud it won't get to the point -- you dispute the charges before paying them back.
There are enough banks in the US nowadays that cover debit fraud that any bank that doesn't do it will really stick out like a sore thumb and eventually lose their customers.
Also with credit you can dispute it before you pay it. With debit you’re trying to fix it up after your paid it.
Can't emphasize this enough!
It is true that many banks do offer fraud protections on their debit cards. But those are just a choice by the bank. They can at any moment stop or withdraw those protections and then you're out of luck.
With a credit card, the protections are written into regulation, so every bank must follow them and can't change the terms.
It's almost like the two things are related, but few people seem to link them...
In Europe and Australia, caps have largely fixed the latter, at the expense of the former. Seems better all around.
And for those that do, it’s very easy to recoup much more than the fee in rewards. For example, Chase Sapphire is one of (or actually the) the most expensive cards at $550/year. But even then it’s very easy to recoup much more in rewards.
In the US you’ll be paying something like 1% on interchanges fees for every transaction, in the EU it’s something like 0.05%. Orders of magnitude less, thus orders of magnitude less rewards, and also fraud, because banks can’t use the interchange to write off fraud and thus implement proper controls.
Both Cash App and Venmo sent me debit cards without requiring any ID.
Or a relative get hurt on the other side of the country.
Or been seriously ill.
Or unemployed.
Or had a major appliance break.
Or a million other things that happen to people every single day.
In both cases, higher risk of default, less chance of profiting from interest, lower creditworthiness score!
So I got 3 credit cards and used them each during each month so that I would established on-time payments on all three and boom, I had perfect credit after a couple years and qualified for a mortgage. I didn't use any credit before I decided to buy a house in my 30s so I had a completely empty credit history prior to that, apart from a library that reported a lost book. So it just took a little while to get my average account age up and my number of on-time payments above some threshold.
Now if you don't use the card at all, it is less effective at establishing credit because you don't get the on-time payment history or balance. The credit bureaus just get reports of on-time or late payments, balances, and delinquencies/defaults, etc.
You will be given the best rating at a small non-zero percentage of your total available credit being used each month, but it doesn't have to be carried.
All you have to do is make sure you don't pay it off too early. Just wait until the due date, and pay off the statement balance, not the full balance. If you pay it off mid-month, before the end of the statement, or paid the full balance instead of what is due, you may get a zero balance reported which is a slight temporary hit to your score, but not that significant. I found that it was best to have a few cards with a total available credit at least 5 times my monthly spending. That way the reported balance ends up being <20% of my total available credit which is near the sweet spot. If I am going to do a refi on my house i might try to micromanage it to somewhere close to 5% for a few months ahead of time and get a few points added to my score, but once you get your score up around 800 it doesn't really matter if it is up or down 10pts or so. I found that as my average account age increased, the swings from slight differences in balance were smaller.
People who don’t use credit often get penalized from a scoring perspective because they don’t have a large credit line and have a higher utilization.
The bank wants you to make payments, period. More credit lines means you have more resilience.
The month I paid off that loan, my credit score dropped precipitously.
In 2006, my wife and I bought a home, and had to get two separate loans to make it work, because our credit scores weren't great at age 26, since I generally avoided credit.
As soon as we opened those two loans, our credit scores jumped to the highest they've ever been.
That and other patterns I've watched over two decades are why I believe credit scores are entirely about how well you pay the banks' game.
https://www.ftc.gov/faq/consumer-protection/get-my-free-cred...
If you are interested in how FICO scoring works there is a lot of information available on various forums. The best resource I have found is on https://creditboards.com/. The FICO algorithm is proprietary and they do not disclose it, but through experimentation people have managed to reverse engineer quite a bit of it.
* Debit card allows to set granular spending limit (e.g. $100 per day). So you can protect the potential amount that a fraudster can spend with your card.
* You can set it up to send transaction details via email on every purchase. This is a lot more convenient than, say, checking the credit card statement at the end of every month.
I actually prefer using debit cards for daily expenses. For me, credit card is almost exclusively for online purchases.
Perhaps these are advantages of the particular debit card you have over the particular credit card you have. I don't think they are general.
i have alerts sent to me for anything higher than a cent
On the fraudsters, with credit cards the limit you'll be liable is generally $0 ($50 in rare cases), by law (regulation).
Do what makes sense in your country.
You’re leaving money and protection on the table by not using them.
A bank is a lot smarter than me. It wouldn't want me to use credit cards if it were in my advantage.
The bank wants you to use credit because they get paid by the merchant every time you do.
But if you're doing this every month then the advantage is what? ~$3k invested somewhere? It's not worth the extra effort for me.
You need to eat.
You're shipping a ton of personal baggage under "personal autonomy".
Why even take part in economic transactions at that point. If your definition of autonomy is that extreme, the concept that someone might have something you want but don't have must be a alien concept
That's why I would rather spend my own money when someone is willing to lend it to me for free.
Using credit in this sense means using a credit card, not necessarily running up a debt in anything other than a nominal sense. Using a credit card and paying off your balance in full every month (so that no fees are assessed) is way better for later loanworthiness and similar credit-based evaluations than using a debit card.
I haven't paid a cent in interest on a credit card since I was in my early 20s. Thanks to credit card points/miles, I've flown all over the world (often in business class), enjoyed stays at hotels, had access to airport lounge access, received various upgrades on hotel accommodations, car rentals, etc. -- all for next to nothing.
Credit cards are an excellent tool if you are willing and able to use them properly.
If you can exercise self-control with spending, you can use a credit card for almost everything. I think Dave Ramsey advises you're less likely to spend money if you use real cash, but for some people, this is not an issue at all.