(Frame of reference: US only) That's a shame, given 18-25 is just the age where a credit card skimmer or online card fraud causing a big fraudulent withdrawal from your checking account, and weeks of waiting to get it back, could be devastating. This has happened to people in my family (likely from gas stations) but we only use credit cards except to pull cash from ATMs, so we only suffer a temporary dip in our available credit line while they investigate and do not have to pay the disputed charges in the meantime.
I know people with terrible credit may have problems getting a credit card, and others may have trouble not treating a credit line as spendable beyond their means, but everyone else should keep the 'debit card' at home or at least confined to their wallet.
I wish I could scream this from the rooftops. People should keep their debit cards locked/frozen, and only use them to get money from ATMs when needed.
All other spending should go onto credit cards, for numerous reasons that have been bought up throughout this thread.
It's extremely common advice to not keep large sums of cash sitting in your checking account. With capital one (and others) you can just open a free savings account, keep the bulk in there (if you don't want to invest it instead), which earns an actual interest, and then there's never a "big" amount of vulnerable cash sitting in your checking account. There's free/instant transfers between savings and checking when you need to move more into your checking.
Most 18-22 year olds are living alone for the first time and have just set up their first bank account and are spending all their time focused on studies and trying to get an internship, so they aren't focused on the difference between credit card and debit card, plus they don't spend a lot out anyways
Using my debit card doesn't force the vendor to send 2-3% of the transaction to a company that's in a country threatening to invade mine in exchange for piss poor rewards.
People who don't have credit? I used a debit card at one point, though I don't anymore.
But also, they're looking at moving their credit cards to Discover as well, which would make huge waves (both in the credit card/banking world, and for their customers, who would probably find it very annoying).
I suspect the play they're making is that putting millions of new Discover cards out there will be a tipping point, pressuring the remaining merchants who don't take it, as a play to break the Visa/MC duopoly.
This could be not that hard to pull off. American Express historically was less accepted because of their high fees, but I don't think Discover has or had that problem.
Maybe I just don't use it enough but I can really only remember one time in the last ~15 years that I've tried to use my Discover card and been told they don't take Discover. I wonder if there's a geographical component, or if certain industries are less likely to take anything other than Visa/MC?
Nearly every transaction account in Australia now uses a debit card as the access card, usually Visa debit. Some people will have a credit card in addition to that.
Other than merchant transactions, the CapitalOne MC card was one of the recommended cards for overseas ATM withdrawal, so the transition to a different network with almost zero international coverage has been very jarring.
I'm overseas and have a Capital One MC card which I've never had a problem with regarding ATMs and frictionless payments, so I find this news fairly alarming. Wait—they're planning on killing their MC card and converting all their card accounts to Discover?
I use mine at Costco for purchases over $300 (limit for tap). At least here in Canada, they only accept Mastercard, not Visa, and I don't remember the PIN for my Mastercard.
Setting your incredulity aside, I'm curious why you think using a debit card would be so shocking. I effectively don't use a credit card at all: I use a debit card (or an equivalent Apple Pay representation thereof) exclusively. From my perspective, if I want something and I have the money, I'll pay for it. If I want something and I don't have the money, I won't pay for it. I don't often want things outside my budget (and I am not well-off, as a grad student), so I don't often feel any pressure to amortize the purchase over time with a credit card. And I prefer that state of affairs, because I don't want to get in the habit of using someone else's money if I can't afford to pay them back.
This isn't a value judgment on people who do use credit cards. There are plenty of reasons why using a credit card by default would be appropriate, and I'm not shocked to hear of someone who does so. But I am curious where your shock comes from, so I shared my story as a data point.
Despite the name, many people use "credit cards" simply for rewards and enhanced purchase protections, with only incidental use of the credit facility.
In the US market, it is surprising that someone would choose to use a debit card over a credit card (if they have the choice) because they are giving up the rewards and enhanced purchase protections, which are available at effectively zero cost.
If I used a debit card over a credit card, I'd effectively be paying ~2% more for most things I buy, for no benefit.
Not to mention the grace period. Especially with high interest rates, it's another perk to have thousands of my dollars stay in the bank all month while my credit card bill piles up. This matters less when rates are super low.
Better fraud protection, too. Depending on the bank it can be a real battle to get fraudulent charges dropped and funds restored, but credit card companies go out of their way to make that process easy. Some even offer it as a function of their site/app so you don’t even need to make a call to get things resolved.
I have several cards and don’t keep a balance on any of them. They’re a tool with several uses, and one of mine is to be able to pay for things without exposing my debit card/bank account.
Because you're leaving 2-3% on the table for every transaction. Using a credit card doesn't mean you can't pay it off in full every month, costing you zero in interest, while taking advantage of reward programs.
On top of all the benefits, if for some reason you get hit with fraud or scammed on a debit card, it's a lot harder to get that money back. Credit is an extra layer of protection.
I have heard this, and it is probably a flaw in my approach to purchases. But is that really justification to ask "who in the world uses debit cards"? I still feel more comfortable not being on the hook to somebody, and the organizations that extend lines of credit don't do so as a prosocial program, certainly. (Just because some people can safely make use of credit doesn't mean everyone can. I know someone who has unfortunately made poor use of their credit card, and I don't necessarily trust myself to avoid a similar fate.)
You do realize that 2-4% is not left on the 'table' its taken from the merchant you are shopping at. If you are at a big box store sure but when going to local merchants its best for them if you use debit or cash.
One could argue the merchant 'choose' to accept CC but in this day and age its more like extortion because the CC lobbyist were able to make it illegal to pass that charge onto the customer.
You are young, you want to use a credit card to protect yourself and build credit history.
Using a debit card, in the event of fraudulent charges, the money is already gone from your bank account and now you are negotiating with your bank to get it back. With a credit card, you file the claim and its generally resolved before your statement closes and anything is due. Your card will also be immediately cancelled, so if its your debit card you will lose ATM access while awaiting the new card.
This will happen to you many times over the course of your lifetime, maybe every 5-10 years. Usually when a number is stolen, they speed run getting as many $1000s of charges in before the card is stopped, which would drain your debit card account.
Credit history is also important. If you don’t have a credit card and build basic credit history before your first job, you will have trouble signing a lease without a parental guarantor.
That has not been my experience at all. I've been using debit cards for all my everyday non-cash purchases for about thirty years now, and it's worked just fine. I expect to keep doing it indefinitely.
I have had exactly one encounter with fraud: a vindinctive ex-girlfriend stole my card info and had herself a little shopping spree, emptying my checking account. I walked into the credit union branch, filed a report, and walked out with $300 and a new card. All the stolen money was restored within a few days. It was not a big deal.
For example in New Zealand, EFTPOS cards are very popular (similar to debit cards, but issued directly by our banks so no user fees ever - the merchant pays for the machine and that's it). People usually have all 3 - an EFTPOS card for most in-person purchase (although online EFTPOS is gaining adoption), a debit card for online or paywave-only places, and a credit card for large purchases/ emergencies. Credit cards here are highly unpopular among the under-25 age bracket; most young people just have EFTPOS and debit.
I think this might be a result of our stricter banking regulations compared to economies like the U.S.; it's difficult for banks to offer tempting enough rewards schemes to entice people to credit cards. Additionally, there is much less of a borrowing culture - most people will only ever properly borrow money once - buying a house. Paying cash for cars is the norm, and purchasing anything else on finance is seen as stupid compared to just saving the money (and earning the interest yourself).
I am young, but not so young as that. I do have a credit card, I just don't use it for anything except the monthly cost of server hosting (to keep it in use). Despite its disuse, I have an "exceptional" credit rating, probably mostly due to the age of the account. So I appreciate the point about credit history, but my habit of preferentially using debit doesn't seem to have been to my detriment on that front.
As to fraud protection, I agree, but as noted in another reply, I wish I understood why the protections afforded to credit don't also apply to debit. There must be some systemic reason for it that I'm unaware of. As it stands, my best guess is simply that "it's a perk to entice people to use credit".
I do the same - I use my debit card for everything, all the time. If I don't have the money to buy something, I'd rather just wait until I do; credit cards make it too easy to spend money faster than I earn it.
People who like to tell other people they shouldn't use debit cards often cite fears of fraud, but that's really never been a problem for me.
Because I get 2 to 3% back on every single purchase and I have my account set up to automatically get paid off every month so I've never paid a fee or interest for a credit card so I basically get free money, extra protection, and better credit just for using a credit card, that's why.
They make money off people who pay interest so I just take advantage of that.
I find my usage of credit cards shrinking every year in the US. It's pretty much narrowed down to non Target retail, travel, and restaurants.
As the sellers get bigger and bigger and electronic cash payments become more normalized, I think we'll see more and more sellers charge at least 3%, if not 5% extra for credit cards so that all of their merchant fees and chargeback risk are covered.
Right now, it's just a bet that having the same price for credit card and non credit card will result in sellers willing to pay a higher price (a psychological phenomena), but more and more sellers are not betting on that.
I wonder if the effect of people being more willing to pay higher prices is seen in discretionary purchases, so travel/non staple retail will continue to incentivize credit card usage, while most other businesses will not.
That's like asking "what does rent have to do with property prices?". Just because you've managed to be on the top of this perverse social summation of usury doesn't mean it isn't predatory and a net negative for society.
Credit cards are one of the most insidious ways that banks extract money from those living closest to the margins of poverty. The benefits you gain are a fraction of the profits gained from raking the most vulnerable over the coals of bankruptcy. They're a financial instrument of torture and I refuse to have anything to do with them. I'm not by any means rich, but I'm 48 years old, have zero debt, and will spend the rest of my life avoiding debt.
Morally, they're also quite problematic, imo. Even if you aren't paying interest because you pay off the balance every month, CC companies can only offer points and cash back and all of that other stuff on the backs of the customers who aren't able to pay it off every month. It's a subsidy of the financially illiterate to those who are. If the predatory 20%+ interest rates were banned, the points and rewards programs would disappear overnight.
I know this isn't popular in the USA, but when compared to the rest of the western world, consumer debt is off the charts insane in America and it doesn't have to be that way. I've lived on both sides of the pond and I much prefer a society where people buy things that they can afford instead of financing everything on the back of a hope and dream that they will for sure pay off the balance this month.
As for the "but muh security!!" argument that I can hear someone typing, having a credit card for security is a terrible argument. You should be lobbying your politicians to regulate financial institutions to build better systems that are not susceptible to such obvious exploits and fraud. Again, much of the world has solved this problem to the point where I can post my bank account number on my business website and nothing bad ever happens. Customers can wire me money directly without approval and I have to manually approve all outgoing transactions at least once (scheduled transfers are still possible); it's not rocket science!
Majority of EU population. Even in US debit is more popular than credit in 18-25 age bracket.
(Frame of reference: US only) That's a shame, given 18-25 is just the age where a credit card skimmer or online card fraud causing a big fraudulent withdrawal from your checking account, and weeks of waiting to get it back, could be devastating. This has happened to people in my family (likely from gas stations) but we only use credit cards except to pull cash from ATMs, so we only suffer a temporary dip in our available credit line while they investigate and do not have to pay the disputed charges in the meantime.
I know people with terrible credit may have problems getting a credit card, and others may have trouble not treating a credit line as spendable beyond their means, but everyone else should keep the 'debit card' at home or at least confined to their wallet.
I wish I could scream this from the rooftops. People should keep their debit cards locked/frozen, and only use them to get money from ATMs when needed.
All other spending should go onto credit cards, for numerous reasons that have been bought up throughout this thread.
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It's extremely common advice to not keep large sums of cash sitting in your checking account. With capital one (and others) you can just open a free savings account, keep the bulk in there (if you don't want to invest it instead), which earns an actual interest, and then there's never a "big" amount of vulnerable cash sitting in your checking account. There's free/instant transfers between savings and checking when you need to move more into your checking.
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Really, this is a non-existing problem in most places outside the US. Are you still using magnetic stripes?????
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That's way less common in Europe. Most places are chip and pin or NFC and that limits skimming quite a lot.
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fraudulent withdrawal from your checking account, and weeks of waiting to get it back
I've had this happen to me twice in about 25 years. Neither bank made me wait weeks.
The most recent one (with a giant megabank) issued a provisional credit in under an hour.
There seem to be a lot of people in this thread who have never actually been through this and are just apeing what other people say online.
U.S. banks largely give debit cards the same protections as credit cards for at least the last 15 years.
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In the rest of the world (not the US), "credit card" == "debit card without zero overdraft limit".
Most 18-22 year olds are living alone for the first time and have just set up their first bank account and are spending all their time focused on studies and trying to get an internship, so they aren't focused on the difference between credit card and debit card, plus they don't spend a lot out anyways
Using my debit card doesn't force the vendor to send 2-3% of the transaction to a company that's in a country threatening to invade mine in exchange for piss poor rewards.
People who don't have credit? I used a debit card at one point, though I don't anymore.
But also, they're looking at moving their credit cards to Discover as well, which would make huge waves (both in the credit card/banking world, and for their customers, who would probably find it very annoying).
I suspect the play they're making is that putting millions of new Discover cards out there will be a tipping point, pressuring the remaining merchants who don't take it, as a play to break the Visa/MC duopoly.
This could be not that hard to pull off. American Express historically was less accepted because of their high fees, but I don't think Discover has or had that problem.
Maybe I just don't use it enough but I can really only remember one time in the last ~15 years that I've tried to use my Discover card and been told they don't take Discover. I wonder if there's a geographical component, or if certain industries are less likely to take anything other than Visa/MC?
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I’d just drop them.
Nearly every transaction account in Australia now uses a debit card as the access card, usually Visa debit. Some people will have a credit card in addition to that.
Other than merchant transactions, the CapitalOne MC card was one of the recommended cards for overseas ATM withdrawal, so the transition to a different network with almost zero international coverage has been very jarring.
I'm overseas and have a Capital One MC card which I've never had a problem with regarding ATMs and frictionless payments, so I find this news fairly alarming. Wait—they're planning on killing their MC card and converting all their card accounts to Discover?
That doesn't sound good.
I use mine at Costco for purchases over $300 (limit for tap). At least here in Canada, they only accept Mastercard, not Visa, and I don't remember the PIN for my Mastercard.
I'm glad I'm not the only one that occasionally forgets a PIN then just uses that as an excuse not to use that particular card for a few years.
Not uncommon in Canada as far as I can tell. Lower fees for the merchant which I care about when buying locally.
Setting your incredulity aside, I'm curious why you think using a debit card would be so shocking. I effectively don't use a credit card at all: I use a debit card (or an equivalent Apple Pay representation thereof) exclusively. From my perspective, if I want something and I have the money, I'll pay for it. If I want something and I don't have the money, I won't pay for it. I don't often want things outside my budget (and I am not well-off, as a grad student), so I don't often feel any pressure to amortize the purchase over time with a credit card. And I prefer that state of affairs, because I don't want to get in the habit of using someone else's money if I can't afford to pay them back.
This isn't a value judgment on people who do use credit cards. There are plenty of reasons why using a credit card by default would be appropriate, and I'm not shocked to hear of someone who does so. But I am curious where your shock comes from, so I shared my story as a data point.
Credit cards are many products rolled into one.
Despite the name, many people use "credit cards" simply for rewards and enhanced purchase protections, with only incidental use of the credit facility.
In the US market, it is surprising that someone would choose to use a debit card over a credit card (if they have the choice) because they are giving up the rewards and enhanced purchase protections, which are available at effectively zero cost.
If I used a debit card over a credit card, I'd effectively be paying ~2% more for most things I buy, for no benefit.
Not to mention the grace period. Especially with high interest rates, it's another perk to have thousands of my dollars stay in the bank all month while my credit card bill piles up. This matters less when rates are super low.
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Better fraud protection, too. Depending on the bank it can be a real battle to get fraudulent charges dropped and funds restored, but credit card companies go out of their way to make that process easy. Some even offer it as a function of their site/app so you don’t even need to make a call to get things resolved.
I have several cards and don’t keep a balance on any of them. They’re a tool with several uses, and one of mine is to be able to pay for things without exposing my debit card/bank account.
Because you're leaving 2-3% on the table for every transaction. Using a credit card doesn't mean you can't pay it off in full every month, costing you zero in interest, while taking advantage of reward programs.
On top of all the benefits, if for some reason you get hit with fraud or scammed on a debit card, it's a lot harder to get that money back. Credit is an extra layer of protection.
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I have heard this, and it is probably a flaw in my approach to purchases. But is that really justification to ask "who in the world uses debit cards"? I still feel more comfortable not being on the hook to somebody, and the organizations that extend lines of credit don't do so as a prosocial program, certainly. (Just because some people can safely make use of credit doesn't mean everyone can. I know someone who has unfortunately made poor use of their credit card, and I don't necessarily trust myself to avoid a similar fate.)
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You do realize that 2-4% is not left on the 'table' its taken from the merchant you are shopping at. If you are at a big box store sure but when going to local merchants its best for them if you use debit or cash. One could argue the merchant 'choose' to accept CC but in this day and age its more like extortion because the CC lobbyist were able to make it illegal to pass that charge onto the customer.
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You are young, you want to use a credit card to protect yourself and build credit history.
Using a debit card, in the event of fraudulent charges, the money is already gone from your bank account and now you are negotiating with your bank to get it back. With a credit card, you file the claim and its generally resolved before your statement closes and anything is due. Your card will also be immediately cancelled, so if its your debit card you will lose ATM access while awaiting the new card.
This will happen to you many times over the course of your lifetime, maybe every 5-10 years. Usually when a number is stolen, they speed run getting as many $1000s of charges in before the card is stopped, which would drain your debit card account.
Credit history is also important. If you don’t have a credit card and build basic credit history before your first job, you will have trouble signing a lease without a parental guarantor.
That has not been my experience at all. I've been using debit cards for all my everyday non-cash purchases for about thirty years now, and it's worked just fine. I expect to keep doing it indefinitely.
I have had exactly one encounter with fraud: a vindinctive ex-girlfriend stole my card info and had herself a little shopping spree, emptying my checking account. I walked into the credit union branch, filed a report, and walked out with $300 and a new card. All the stolen money was restored within a few days. It was not a big deal.
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This varies a lot between countries and cultures.
For example in New Zealand, EFTPOS cards are very popular (similar to debit cards, but issued directly by our banks so no user fees ever - the merchant pays for the machine and that's it). People usually have all 3 - an EFTPOS card for most in-person purchase (although online EFTPOS is gaining adoption), a debit card for online or paywave-only places, and a credit card for large purchases/ emergencies. Credit cards here are highly unpopular among the under-25 age bracket; most young people just have EFTPOS and debit.
I think this might be a result of our stricter banking regulations compared to economies like the U.S.; it's difficult for banks to offer tempting enough rewards schemes to entice people to credit cards. Additionally, there is much less of a borrowing culture - most people will only ever properly borrow money once - buying a house. Paying cash for cars is the norm, and purchasing anything else on finance is seen as stupid compared to just saving the money (and earning the interest yourself).
I am young, but not so young as that. I do have a credit card, I just don't use it for anything except the monthly cost of server hosting (to keep it in use). Despite its disuse, I have an "exceptional" credit rating, probably mostly due to the age of the account. So I appreciate the point about credit history, but my habit of preferentially using debit doesn't seem to have been to my detriment on that front.
As to fraud protection, I agree, but as noted in another reply, I wish I understood why the protections afforded to credit don't also apply to debit. There must be some systemic reason for it that I'm unaware of. As it stands, my best guess is simply that "it's a perk to entice people to use credit".
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I do the same - I use my debit card for everything, all the time. If I don't have the money to buy something, I'd rather just wait until I do; credit cards make it too easy to spend money faster than I earn it.
People who like to tell other people they shouldn't use debit cards often cite fears of fraud, but that's really never been a problem for me.
Because I get 2 to 3% back on every single purchase and I have my account set up to automatically get paid off every month so I've never paid a fee or interest for a credit card so I basically get free money, extra protection, and better credit just for using a credit card, that's why.
They make money off people who pay interest so I just take advantage of that.
Credit cards are strictly better in all aspects (rewards, protection, free working capital, etc) UNLESS you are bad with money/finances.
So there is actually no good reason to use debit cards. I say this as a former user. Makes no sense at all once you think everything through.
I find my usage of credit cards shrinking every year in the US. It's pretty much narrowed down to non Target retail, travel, and restaurants.
As the sellers get bigger and bigger and electronic cash payments become more normalized, I think we'll see more and more sellers charge at least 3%, if not 5% extra for credit cards so that all of their merchant fees and chargeback risk are covered.
Right now, it's just a bet that having the same price for credit card and non credit card will result in sellers willing to pay a higher price (a psychological phenomena), but more and more sellers are not betting on that.
I wonder if the effect of people being more willing to pay higher prices is seen in discretionary purchases, so travel/non staple retail will continue to incentivize credit card usage, while most other businesses will not.
It’s shocking to many because there are so many downsides to using them. Only the merchant benefits.
People who don't enjoy debt?
What do credit cards have to do with debt? I've used them for over a decade and never a carried balance
That's like asking "what does rent have to do with property prices?". Just because you've managed to be on the top of this perverse social summation of usury doesn't mean it isn't predatory and a net negative for society.
Credit cards are one of the most insidious ways that banks extract money from those living closest to the margins of poverty. The benefits you gain are a fraction of the profits gained from raking the most vulnerable over the coals of bankruptcy. They're a financial instrument of torture and I refuse to have anything to do with them. I'm not by any means rich, but I'm 48 years old, have zero debt, and will spend the rest of my life avoiding debt.
Finance is not a zero sum game.
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Morally, they're also quite problematic, imo. Even if you aren't paying interest because you pay off the balance every month, CC companies can only offer points and cash back and all of that other stuff on the backs of the customers who aren't able to pay it off every month. It's a subsidy of the financially illiterate to those who are. If the predatory 20%+ interest rates were banned, the points and rewards programs would disappear overnight.
I know this isn't popular in the USA, but when compared to the rest of the western world, consumer debt is off the charts insane in America and it doesn't have to be that way. I've lived on both sides of the pond and I much prefer a society where people buy things that they can afford instead of financing everything on the back of a hope and dream that they will for sure pay off the balance this month.
As for the "but muh security!!" argument that I can hear someone typing, having a credit card for security is a terrible argument. You should be lobbying your politicians to regulate financial institutions to build better systems that are not susceptible to such obvious exploits and fraud. Again, much of the world has solved this problem to the point where I can post my bank account number on my business website and nothing bad ever happens. Customers can wire me money directly without approval and I have to manually approve all outgoing transactions at least once (scheduled transfers are still possible); it's not rocket science!
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