I’m still trying to figure out why people think I’m foolish for using a credit card instead of a debit card. I’m a Dave Ramsey listener and fan so I’ve heard him rant and rave over the credit card — burn it, torch it, drown it, just be sure to kill it (if you’re not familiar with Dave Ramsey here is an introduction). Seriously though, don’t you think the whole no credit card intolerance has gone a little too far? When you take off your thinking cap the results can be dangerous.
Photo by MVI via Flickr
I imagine the following discussion.
Setting: A nosy neighbor comes into my home and sees my circular saw and says:
Nosy Neighbor: “Hey Craig, you need to stop using that saw because if you ever took the blade cover off it would slice off your finger.”
Me: “But I never take the blade cover off.”
Nosy Neighbor: “I’m just saying if you did take it off, it would be dangerous.”
Me: “I don’t take it off.”
Many of the conversations I have had about credit cards and debit cards have sounded much like the conversation above — except we talked about the two forms of plastic. The concerned citizen says my credit card is a danger to my family, my future, and my finances. I say my track record has proven otherwise. And around and around we go in circles. It is almost as if people are unwilling to have a rational discussion about the advantages of credit cards.
If the discussion was about plastic versus cash, then you have some valuable arguments in favor of cash being cheaper. However, because plastic is more convenient people start to make a big deal about how you should use a debit card and not a credit card. If the discussion were about poor money managers who did not use credit wisely, then my view would be different. But for people who manage their purchases and pay off their bills each month, I think carrying a credit card is fine. And to be on the safe side, our family has established some credit card guidelines that protect us from improperly using the cards.
Let’s say you are filling up with gas at the local gas station. Do you think that you would spend a different amount if you used the debit card? I seriously don’t think you would.
With a credit card I only have one major accounting task — to pay the bill at the end of the month (plus to review my statement). But, with a debit card I need to be sure there is cash in the account and to be sure when checks clear they do not conflict with my debit card purchases. If I make a mistake with my calculations I will get hit with a $29.00 bank overdraft fee. Personally, I know I’m more likely to overdraft than I am to miss an automatic credit card payment.
Let’s return to the discussion about filling up with gasoline. If I put $50 in the tank with a debit card I get zero bonuses. With the credit card I can get a few percent cash back (or comparable points) with most cards. Essentially, I get something for doing nothing. Take a look at the best credit cards.
A couple of years ago I went to rent a car with a debit card. I learned that if I used my debit card I was required to pay the extra insurance at $12.95 per day. I chose instead to use my credit card so I would avoid the $12.95 fee.
I do not know my FICO score, though a banker once told me, “Man, you have a good score”. While I try not to care about FICO I know some companies do care about the score. Your FICO score impacts car insurance rates and home mortgages, so I’d like to have a better score. If carrying a credit card instead of debit card helps improve my FICO score, then I will carry a credit card.
Next time you encounter a real life credit card user, don’t automatically dismiss them as having a lower IQ. There are legitimate reasons to choose to use credit over debit. With that said, if you are a credit card user and you habitually do not pay your full monthly balance, then there are probably about 1,000 reasons why you should cut up the credit card. If you are a responsible credit card user, I don’t think you should be bullied into ditching the card. I definitely don’t think there is a valid reason to switch from a credit card to a debit card.