Published in: Credit Cards | Jan. 1, 2019

4 Reasons You Should Stop Using Your Debit Card Right Now

By:  Lyle Daly

We are committed to full transparency as part of our mission to make the world smarter, happier, & richer. You should know that offers on The Ascent may be from our partners - it's how we make money. That transparency to you is core to our editorial integrity, which isn’t influenced by compensation.

Your debit card may be a convenient way to pay, but it also has some serious drawbacks. Find out why you should stop swiping your debit card and switch to a credit card.

Young Woman Cutting Debit Card With Scissors

Image source: Getty Images

Debit or credit? That’s the big question now that cards have supplanted cash as the most popular way to pay.

Debit cards are still the payment method of choice for many consumers since they’re easy to get and don’t carry the potential for credit card debt. But when you really look at the benefits of each type of card, it’s clear that using a debit card is a poor choice. Here’s why you should stop using your debit card and pay by credit card whenever you can.

1. It doesn’t help your credit score

Like it or not, your credit score is an important part of your financial history. And you’re not improving your score at all by using a debit card.

A credit card, on the other hand, is one of the most effective ways to build your credit score. If you use your credit card regularly and make your payment on-time, you’ll build a positive payment history, which plays the biggest role in your FICO® Score. Credit utilization plays the second-biggest role, and that’s another factor you can control with responsible credit card use.

2. You aren’t earning rewards

There used to be plenty of banks offering rewards on debit card purchases, until legislation limited the fees that banks could charge merchants on debit card transactions. Because of that, hardly any banks offer debit cards that earn rewards, and the debit cards that do have rates of 1% back or less.

Credit card rewards can be extremely lucrative if you know how to maximize them. Even if you don’t want to do much research on rewards, you could keep it simple and go the cash-back route, where the top cash-back cards can earn you 3%, 4%, or even 5% back in specific spending categories. Or, you can check out the best travel rewards cards and earn points to pay for your vacations.

3. The dispute process is inconvenient

As you know, your debit card is directly connected to the money in your bank account. This can be an issue if you need to dispute a transaction, whether it’s due to fraud or a problem with the merchant, because you won’t get your money back right away. Your bank must complete their investigation first and find in your favor, which can take weeks or longer.

When you dispute a credit card transaction, your card issuer freezes that transaction until they’ve done their investigation. You don’t need to pay anything during that time, so you won’t need to worry about being out any money while you have a dispute in progress.

4. You won’t get complimentary protections for your purchases

Like rewards, purchase protections are another area where credit cards trump debit cards. Debit cards rarely have much in the way of purchase protections, and even if they do, they’ll pale in comparison to what a credit card could offer.

Protections vary depending on the card, but many of the best credit cards will include a lengthy list of them, such as:

  • Damage and theft coverage for recent purchases
  • Extended warranty coverage
  • Return protection
  • Auto rental insurance
  • Trip cancellation insurance
  • Lost luggage reimbursement

While credit cards with annual fees usually have the most protections, there are plenty of great no-annual-fee cards with helpful coverages, as well.

Put the debit card away

If you’re still pulling your debit card out at the store or online, it’s time to make a change. The only potential downside of switching over is the possibility of credit card debt, but that’s easy to avoid.

Just maintain the same spending habits you had with your debit card and always pay your statement balance so you don’t rack up any debt. The end result is the same -- you’re paying for everything with the money in your bank account. You’re just using a credit card first, which means you’ll also be helping your credit and collecting rewards along the way.

Our #1 cash back pick has a surprise bonus

This may be the perfect cash back card! That's because it packs in $1,148 of value. Cardholders can earn up to 5% cash back, double rewards in the first year, and avoid interest well into 2020. With such a deep bench of perks you'll wonder how this card packs in a $0 annual fee. Best yet, you can apply and get a decision in two minutes. Learn more with our in-depth review.

Find the right card for you

Cash Back & Rewards