Picking up Nickels

Tuesday, September 19, 2006

The Debit Card Agenda

Why would any intelligent person use a debit card instead of a credit card? I just read the latest anti-credit card diatribe from a one trick pony at the Morningstar Forums, and just don't understand where this guy is coming from. He has a history of credit card problems, and overcame them by becoming a Dave Ramsey zealot whose philosophy is All debt is bad! (even 0% car loans).

Here are some of his latest pearls of wisdom from Morningstar forum user chipmunk:
  • Credit card companies getting nervous
    Studies have long shown that the average credit card user spends 12% - 18% more compared to the average cash buyer ... So, it is clear that, even if you use a credit card and pay it off in full every month, you are still losing money.
  • 5% rebate credit cards are going away
    It sounds to me like the debunking of the rebate/airline miles myth is spreading and having an impact. I think the ripoff credit card companies are finally starting to feel the pinch of people wising up and switching to debit cards.
  • Credit card rebates: truth or myth
    There is NO positive side to credit card use. You will spend more if you use credit cards. Even by paying the bills on time, you are not beating the system!

How could anyone dispute the fact that credit cards are superior to debit cards in every way as long as you pay your balance in full every month? Here are the facts that the debit card fanatics refuse to acknowledge:

  • An informed and responsible consumer doesn't confuse payment method with poor spending habits.
  • If you are the victim of credit card fraud, the bank's money is lost, not yours.
  • Your maximum liability for credit card theft is $50 per card, but can be unlimited with a debit card (see federalreserve.gov for details).
  • A credit card provides you with a 30 day interest free loan.
  • Many credit cards offer rewards and extended warranties.
  • Responsible credit card use helps improve your credit score, which can impact your ability to get a loan, insurance, or a job (Bad Credit = Not Hired).


  • I agree with you 100% that credit card use is better than debit card use but there are a few caveats.

    The more credit cards get used to buy things the greater the cost of the item you're buying. Visa/Mastercard/etc charge fees for using their network and that usually gets passed on to the consumer.

    If EVERYONE started using credit cards vs paying cash then you can bet small business would dramatically raise the prices of their goods.

    Because debit cards are EFT transactions, their costs are signficantly lower. Businesses love debit cards and hate credit cards so I think this is where they're coming from.....

    By Anonymous Anonymous, at 9/19/06, 4:33 PM  

  • Nice post. I totally agree with on this. I don't think the guy has done his homework well. Credit cards are a boon when used properly and many people refuse to believe that.

    Btw, apart from the benefits you mentioned...there is also travel insurance benefit with most cards.

    By Blogger GolbGuru, at 9/19/06, 11:26 PM  

  • I agree that debit cards are a better deal for the merchant. I could also understand how irresponsible spenders use debit cards to protect them from themselves. I just hope that they continue to subsidize those of us who know how to use credit cards responsibly.

    GolbGuru, thanks for mentioning the travel insurance benefit. I guess that shows how little I travel. :)

    By Blogger Frugal Frugalson, at 9/20/06, 8:21 AM  

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