The Pros and Cons of Using a Debit Card

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Debit cards are an extremely popular payment card type that are often issued by major payment processors, such as MasterCard. According to Statista, as of 2017 there were 751 million MasterCard debit cards in circulation worldwide. A debit card, in contrast to a credit card, deducts money from your checking account as soon as you make a purchase.

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Let’s take a look at the pros and cons of using a debit card:

The Pros:

Convenience

With a debit card, you no longer need to carry cash around. When it comes to making a purchase, you don’t need to count out coins or bills, or write a paper check. It’s much easier to simply take out your debit card and make the payment. Compared to a credit card, when you make a payment with a debit card the money leaves your account right away, so you are not left with a big bill to pay at the beginning of the next billing cycle – which brings us to our next point.

Keeps you in budget

It’s easy to stay within budget when using a debit card. Unlike a credit card, you actually need to have money in your associated account in order to make a payment. As long as you don’t have an overdraft set up, you’ll be unable to spend money that you don’t have. This means that you won’t be able to go into debt. This allows you to avoid the fees associated with debt as well as the fees that credit card companies charge for late payments.

Easy to acquire

Credit card applications are often lengthy, and you need to have a credit check to ensure you are eligible. In contrast, most bank accounts, both checking and savings accounts, will offer you a debit card linked to the account without the need to fill out a complicated application or go through any sort of preliminary check.

Cash-back

Two features that increase the convenience of a debit card include the ability to take out cash from an ATM, and the ability to get cash-back at most stores. This means that if you ever need to make cash payments when you’re out and about, you can easily take out exactly what you need at the time.

The Cons:

More risky than credit cards for disputed charges

As the money actually left your account when you made a payment, there is a higher risk when disputing a charge on your debit card. You may want to dispute a charge if an item you purchased was never delivered to you or was found to be defective. However, most of the time, stores are happy to refund when there is a problem – remember to check store and product reviews online before making a purchase. When buying from brick-and-mortar stores, only choose reputable ones with good customer service.

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Doesn’t improve your credit score

You can only build up a credit score using a credit card, by paying credit card bills on time. A high credit score is important if you need to borrow money, or to get higher credit limits on your credit cards—something you won’t be able to achieve using only debit cards. However, if you are using a credit card and don’t pay back on time, your credit score suffers and a bad credit score is known to be far worse than no score at all. In addition, most banks these days will look at past transactions or salaries when approving loans.

No reward points

Many credit cards have reward schemes whereby you can accrue points to spend on travel and other purchases. Debit cards do not usually offer reward points, although some do offer their own set of incentives, such as various travel insurances or other benefits. We recommend you speak to your bank for more details.

Bottom line

Debit cards are an invaluable asset to anyone looking to pay for goods or services. They’re easy to get and easy to use, eliminating the need for cash, and preventing you from going into debt. As this payment method is so popular, almost every merchant accepts debit cards. While disputing chargebacks can be more difficult, and credit cards have the edge when it comes to reward points and credit scores, debit cards remain a highly suitable and desirable solution for everyday purchases.

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