Five Reasons I Prefer Using Credit Over Debit or Cash
Last week, I explained why I don’t hate credit cards and tried to dispel common myths about credit card usage and credit scoring. There were a few Die Hard D.a.ve Ra.m.sey fanatics that challenged my point of view. So it was an interesting discussion indeed.
I think it’s pretty obvious I’m not a DR follower. I demonstrate my belief in financial freedom by planning for our future with strict commitment and discipline, but I also spend money on what I value to make sure we enjoy the journey. I also abhor consumer debt, but I prefer using credit cards. Why? Everyone knows there are rewards and cash back, so that’s a given. Here are five additional reasons I prefer using credit over debit or cash:
1. Extended Warranties:
When I use my American Express, they provide an additional warranty that kicks in after the manufacturer’s warranty expires. Because of this, I use Amex when buying big ticket items.
2. Extra Savings:
Many retailers offer additional discounts or free items when paying with a Visa, MC, Discover, or Amex. These special offers are exclusive to the card holder. So if I’m buying that product/service anyway, I use the card specified for the extra savings. Here’s a perfect example: free movie tickets for Visa Signature card holders.
3. Safe Online Shopping:
When I shop online, I use the virtual number feature. Basically, the computer makes up a fake credit card number and I get to establish the amount and expiration date for one time or recurring use. This way, my real credit card number is never exposed on the internet.
4. Theft Protection:
If, by chance, my credit card number is compromised or my card is lost/stolen, the thieves may have a field day, but I have zero liability on my cards. As long as I report the card stolen within 3 days, I do not have to pay a dime. I just call up the credit card company to dispute the charge or report the card stolen. In the past 7 years, I’ve only had to do this twice. Both times, it was easy as pie. But if this were a debit card, all of my cash would be gone and I’d have to fight for weeks (maybe months) to get it back…if ever.
5. Dispute Protection:
I recently bought a digital camera online. When I received it in the mail, I changed my mind and returned it. Based on the merchant’s return policy, I returned everything in its original box, packaging, etc. and within the amount of time they specified. Because there was nothing wrong with the camera, I had to pay for return shipping – no big deal. I even put insurance on the return package, an additional expense I will not get back. With online tracking, I can see the merchant received the camera on 4/20. Note it is now 5/11 (21 days later) and I still have not received a refund.
I called twice and was told, both times, the refund was “under review.” WTF does that mean? I really don’t know, and to be honest, I don’t care. When I receive my credit card bill, I will pay the balance in full (as usual), EXCEPT the cost of the camera. Further, if this merchant has not issued a refund by 5/20, 30 days after receiving the return (per the credit card terms – yes, I read them), I will dispute the charge. If I can prove that the camera was returned, which I can, my bank will do a charge back. There’s an additional fee the merchant will have to pay for a charge back, but I will have spent $0. Again, easy as pie.
Remember this nightmare when the lady had no money to pay her bills because of a merchant dispute/error? *smh* Enough said.
Can any of the 5 things above be accomplished with ease and convenience by using a debit card or cash?
WARNING: If you disagree with my POV, no problem. You are free to share your opinions in the comment section, but let’s keep it reasonable. Any dumb ish about causing harm to others, not having a heart, needing to see the light, or praying for me because I use credit cards will NOT be tolerated on THIS blog.
Side Note: writing that was funny so I lost my train of thought. LOL Ok, where was I…
For those who don’t like reading about people who love credit cards and use them responsibly, this isn’t the blog for you because I blog about my credit and credit scores often. There are many PF blogs that share your opinion and hate credit cards too. This isn’t one of them.
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SM, Hi! I’m curious, do you find that you spend just a little bit more when you use a credit card vs. cash or debit card? Or are you really disciplined? I found that I would spend a little bit more on a planned purchase when I used the credit card, so I switched to cash/debit exclusively. I’d like to take advantage of some of the “extras” with credit cards for things I’d buy anyway, but sometimes I don’t trust myself. What do you do to keep yourself on track?
Thanks! Maria
Actually, I spend more when I use cash. For some reason, my brain is wired to think “if you have the money on hand, why not spend it?” If I have a $20 bill, once I break it, it’s as good as gone. Even if I don’t need/want anything, I will sit and think of a reason (any reason) to buy something. Crazy, I know. When I use credit cards, my spending is more controlled. I buy what I need/want throughout the month, but I do not exceed the predetermined amount I can afford to pay in full when the statement closes. Also, credit cards give me a reason/incentive to track my spending – to the penny – in Excel because I need to make sure my credit card bill is correct. [-SM]
i see there is a lot of passion around the love or hate of credit cards. i definitely can’t say that i hate them, no way. i’m very good with the use of my credit card with one exception… the grocery store! i don’t know what it is about the grocery store but i go over budget EVERY time i use plastic (credit or debit). my credit card offered 5% cash back at grocery stores, pharmacies and gas stations. however, i was overspending more than i received in rewards. even when i switched to the debit card, same results. the grocery store is definitely my budget buster if i don’t use cash. other than that, i’m good. no overspending, no balances that aren’t paid off at the end of the month, no problems. i probably use plastic for 90% of my spending.
I learned my lesson the very hard way, and it’s a lesson i’ll be paying off for a very long time. However, I do have a store credit card that I use for reward points and you better believe that sucker gets paid off the second I receive my items!! 21% interest rates suck.
Once someone has tackled their relationship with money and learned how to manage their cash flow, credit cards make sense (you fall in this camp I gather).
I suspect that the nutty comments you have gotten about this are from people who have not matured into a healthy, literate relationship with money (yet?) for whom paying off balance in full every month for stuff you would have just bought with cash anyway is not a concept they have been able to get to.
No one should use credit cards until they have cash flow management, but once they have, why not take advantage of cash back cards?
Dave Ramsey works for people who are not yet financially literate and do not yet know cash flow management.
But once you do have those, he is irrelevant.
Oh and I don’t like DR either…I think some of his advice isn’t realistic.
I kind of agree with finance girl.
I don’t yet have a healthy relationship with money (although I’m working on it) so for me credit cards = bad!!! Although, I do recognize the value in them too for others, just not me at the moment.
I hope though to get things worked out so that I can utilize them with discipline and with healthy financial decisions in the future.
Hi SM,
Just a funny story about credit cards. I put EVERYTHING I purchase on my credit card so I get the reward bucks. I can fish out that card in 2 seconds with my eyes closed.
I was at the public library last week, and after I pushed my stack of books towards the librarian, I automatically whipped out that credit card and handed it to her, not even thinking. She raise an eyebrow and said “I can charge these if you REALLY want me to”.
B.
LOL @ Beth B.
I rarely use my debit card. I give myself a cash allowance each week for lunch – when I forget to hit the ATM, I use my debit card.
This post made me go back and read the comments from the other day and it did get a little heated – but ‘different strokes for different folks’. I prefer using my credit card for the reasons listed above and convenience – you can’t pay at the pump with cash. And when you use a debit card – they put that funky hold on your funds and then release them after the purchase is complete.
Great points, SM. I didn’t remember about the theft protection.
I use my credit card for EVERYTHING, and have always had an AmEx for that reason–it must be paid off monthly. I don’t think I spend more because it’s credit instead of cash; I still keep a strict budget, always have. I use the cash back card and last month got $478 from AmEx for charging my groceries, gas, etc. I know this doesn’t work for everyone, but if you have the discipline, it can work well for you.
I prefer using my credit cards & never carry a balance. This morning, the cashier @ Duane Reade gave me the ’side eye’ for using my credit card for a $2.15 purchase. Whatever. I got double rewards for using it at that store. LOL
Beside I hate to handle cash after a friend wondered if his dollar was at a strip club (b/c it had an odor)
You know about my card phobias and lack of disciplien, so I need to be extra careful and, for most of my purchases I still use debit. But I have to agree with you. I used the points I racked up on my Amex to get $267 off my flight to Hawaii this fall! Nice chunk of change to save!
1) My AMEX annual fee was about $100. I don’t know what they are now but the extended warranties I get are usually less than $10.
2) I do most of my shopping at boutiques and they always give a great discount on the purchase price when paying in cash or with a check.
3) I rarely shop online. I don’t know about this one.
4) I’ve gone on shopping sprees before. I have bought gas twice in a day and the bank shut down my card and said it was suspicious activity unusual for me. My sis had her trunk broken into and her debit card stolen. The thief bought groceries and the bank refunded all but $0.
5) prior to chase taking over wamu, disputes were simple. They gave the refund while the dispute was pending. Now I need to find a new bank because Chase has different policies.
I don’t have anything against people using credit cards. I just think its preference. I prefer to pay for stuff before I use it or when I use it. I feel less free when I owe someone for stuff I no longer have or already used. It bothers me to get paid and have to watch the money dwindle because I’m paying for stuff I’m not using anymore.
I will say that I enjoy people owing me money and paying in installments. There is nothing better than getting a check each month from someone that owes you. I just want to stay the lender.
Different strokes for different folks. If someone is currently in debt like myself, using a credit card is a big no no. However, once you’re debt free and able to manage your money wisely then its smooth sailing from there credit card usage included.
<3 my cc’s. AND my rewards and grace periods! Use them right, you won’t get burned. Personal responsibility, people!
I also love that cc’s usually offer some sort of additional insurance policy with rental cars.
The only thing i can think of that may be bad about them is that I think retailers have to mark up prices to make up for the cost of the credit card charge…but since cc’s aren’t going away (and even if they did, prices wouldn’t drop, i’d bet that anyday), that point is moot!
I don’t hate Credit Cards either and I also think that they have some great uses.
Granted, my usage of them is going down but still they are an important part of your financial toolbox.
I used to work at a bank and I just HATE touching cash. I love my little pieces of plastic…aka credit cards..aka the things that give me cash back woo hoo!!!!!
It really takes discipline to use the card responsibly and not carry a balance to maximize the cash back and some people are not at that point yet.
I used my cards irresponsibly when I first got them but I learned my lesson. I now put EVERYTHING on my card since I get cash back for a category!!! So yes…I WILL be putting that $0.20 at CVS on my card since that qualifies as a category that gives me cash back.
Love credit cards and love your blog. Keep using (cards that is!!!!)
Woo – who would start ish in your comments?! I am not disciplined and credit cards are not for me until I grow a little/mature a lot(!), but to each her own. I like the thought of being able to live without credit and am striving for that state, but being able to and choosing to use credit to your benefit is a far ways down the road for me…That being said, the only issue about CCs that gets me passionate/mad is knowing how much I paid them for maintaining my false former lifestyle!
Credit cards used responsibly are just another tool in personal finance. What works for one doesn’t work for someone else. We use Discover for pretty much everything, and pay it off in full at the end of the month; cash back rewards are used towards Christmas (and the rest of the holiday bill is paid off by a special savings account I set up just for the holidays). I know our billing cycle dates in my head. Credit and debit cards help us to stay on track; cash seems to disappear. I consolidate everything through BoA’s My Portfolio, so I know daily where we are with our expenses. Returns are easier. And responsible use of credit helps my FICO score, which is 820 (yay). I like them and I use them. But only if I can pay in full.
Yes, I agree with CT Mom….used responsibly they are a great tool!
Amen! I spend less with the card because I know I will see my purchases over and over again as I pull up my account every few days to check on my balance. I know what I spend in a month typically and am quick to spot if there is something unusual. Cash disappears from my wallet and I loath to quickly replace it because I won’t necessarily remember where it went.