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4 reasons why you shouldn't use your debit card

Jan. 19, 2021
6 min read
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Editor’s note: This is a recurring post, regularly updated with new information.

If you're just starting to build your credit and explore credit card options, you may be used to swiping and inserting your debit card for your everyday purchases. Maybe you even choose the "credit" option when you're checking out to bypass entering your PIN. What's the difference? Does the debit vs. credit distinction really matter anyway? Absolutely.

Debit cards do a great job of helping you make ATM withdrawals and deposits, but for any other activity, they may be better off collecting dust in your wallet. Consider these four reasons why you should avoid using your debit card.

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1. They Don't Do Much to Protect You From Fraudsters

Your debit card and credit card may look similar, but the law looks at these two pieces of plastic very differently when it comes to your liability if a thief uses each of them for a fraudulent spending spree. Credit cards fall under the Fair Credit Billing Act, which limits your liability for unauthorized purchases to a maximum of $50. So, if someone manages to steal your number and rack up thousands of dollars under your name, you won't have to pay more than one Ulysses S. Grant.

However debit cards are regulated by the Electronic Fund Transfer Act, and fraud can be a much different — and more costly — story. If you catch the unauthorized activity and report it within two business days, you'll still keep your liability to $50. But if you fail to report it until after that two-day period, your liability leaps to $500. Fail to tell your bank about it until more than 60 business days? You might owe the entire amount (side note: No matter what you're doing, I hope you're reviewing your banking activity much more frequently than every 60 days).

Data breaches and identity theft aren't going away anytime soon. Ditch your debit card to make sure you won't be on the hook if a criminal cashes in on your number. While you're at it, be sure to do all you can to keep your credit card safe, too.

If a hacker gets hold of your debit card number, you could be on the hook for paying the bill. (Photo via Shutterstock)
If a hacker gets hold of your debit card number, you could be on the hook for paying the bill. (Photo via Shutterstock)

2. They Can Keep Your Cash in a Holding Pattern

When you're checking in to a hotel room or picking up the keys for a rental car, using your debit card will lock up your hard-earned dollars. Companies need to know that you can actually cover an amount higher than the price you reserved. The hotel wants to know that you have the funds to cover minibar items or tabs at the restaurant that you charge to the room, and a rental car company wants to make sure that they can charge you if you don't fill up the tank. So, they place an extra hold on your card, which varies based on the company.

Related: 5 things you need to know about debit and credit card holds

For example, at Marriott, you'll see a hold for all the room charges and resort fees plus a hold for incidentals -- and that hold may not be released for up to five business days after checkout. Hertz' company policy stipulates that a debit card will be charged "a reasonable amount to cover any incidental charges." With a credit card, those holds are a pending charge against your line of credit — not your actual cash.

If you use your debit card to pay for a hotel room, for example, the bank may keep your card in a holding pattern for incidentals. (Photo by John Greim/LightRocket via Getty Images)
If you use your debit card to pay for a hotel room, for example, the bank may keep your card in a holding pattern for incidentals. (Photo by John Greim/LightRocket via Getty Images)

3. They Aren't Hiding Any Travel Benefits

Lost baggage, missed flights, severe weather — there's no shortage of potential hiccups on the horizon when you're on the go. If you book your trip with your debit card, it's up to you to deal with most of those interruptions. If you use a credit card with travel protection insurance, though, there's a good chance you'll be covered.

In addition to covering challenges that are out of your control, some cards can prove to be your best friend in a worst-case scenario where you might be at fault. A wide range of credit cards include primary rental car coverage that can help avoid paying extra for a policy or dealing with the hassles of using your own insurance. Looking for proof of the value of that insurance? Check out this tale of troubles with a Chevy Malibu rental in California.

If you use a debit card to rent a car, you won't earn any rewards at all. (Photo by: Jeffrey Greenberg/UIG via Getty Images)
Many credit cards offer primary car rental insurance, which can be hugely valuable. (Photo by: Jeffrey Greenberg/UIG via Getty Images)

4. They Won't Help You Rack Up Rewards

Why use a debit card for something such as groceries when you can rack up points at U.S. supermarkets on the American Express® Gold Card? (Photo by The Points Guy)

It's no secret that everyone at TPG is passionate about earning points and miles, and debit cards simply don't stack up in the rewards game. Why? Because they don't help banks earn as much as money as credit cards.

In 2010, part of the Dodd-Frank Act limited the amount that banks could charge for interchange fees on debit card transactions to approximately 21 cents per transaction. Credit cards, on the other hand, have a wide range of behind-the-scenes fees. Those fees — which you can read about here — are part of the reason that banks offer such strong incentives for using your credit card.

There's really only one reason to pull your debit card out of your wallet: debt. If you are one of the Americans who racked up credit card interest and fees in 2022, a debit card may be an essential ingredient in helping balance your personal budget and avoid finance charges.

Additional reporting by David McMillin

Featured image by Getty Images/Cavan Images RF
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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  • Limited Time Offer: Earn 100,000 Bonus Marriott Bonvoy Points after spending $4,000 in purchases on your new Card in your first 3 months of Card Membership. Offer expires 11/2/22.
  • 6x points at hotels participating in the Marriott Bonvoy® program.
  • 4x points for purchases made at restaurants worldwide, at U.S. gas stations, on wireless telephone services purchased directly from U.S. service providers and on U.S. purchases for shipping.
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  • Receive 1 Free Night Award every year after your Card renewal month. Plus, earn an additional Free Night Award after you spend $60K in purchases on your Card in a calendar year. Awards can be used for one night (redemption level at or under 35,000 Marriott Bonvoy® points) at hotels participating in Marriott Bonvoy®. Certain hotels have resort fees.
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Terms & restrictions apply. See rates & fees
Best Marriott card for Business Owners
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
3 / 5
Go to review

Rewards Rate

6X6x points at hotels participating in the Marriott Bonvoy® program.
4X4x points for purchases made at restaurants worldwide, at U.S. gas stations, on wireless telephone services purchased directly from U.S. service providers and on U.S. purchases for shipping.
2X2x points on all other eligible purchases.
  • Intro Offer
    Limited Time Offer: Earn 100,000 Bonus Marriott Bonvoy Points after spending $4,000 in purchases on your new Card in your first 3 months of Card Membership. Offer expires 11/2/22.

    Earn 100,000 points
    75,000 points
  • Annual Fee

    $125
  • Recommended Credit
    Credit ranges are a variation of FICO© Score 8, one of many types of credit scores lenders may use when considering your credit card application.

    670-850
    Excellent/Good

Why We Chose It

The Marriott Bonvoy Business Amex is a stacked card with a rewards rate that will help you earn bonus points on everyday and business-related purchases. You'll earn 15 elite night credits each calendar year, and receive automatic Gold elite status. Finally, the free night award certificate with a redemption level of 35,000 points or less can get you hundreds of dollars in potential value each year.

Pros

  • 6x points on eligible purchases at hotels participating in the Marriott Bonvoy program
  • 4x points at restaurants worldwide, U.S. gas stations, wireless telephone services purchased directly from U.S. service providers and U.S. shipping
  • 2x points on all other eligible purchases
  • Earn a free-night award each card renewal month (up to 35,000 points)
  • Receive 15 elite night credits to jump-start status
  • Transfer Marriott points to 40+ airlines

Cons

  • Airline points transfer ratios are poor
  • Must spend $60,000 in a year for second free-night award
  • Limited Time Offer: Earn 100,000 Bonus Marriott Bonvoy Points after spending $4,000 in purchases on your new Card in your first 3 months of Card Membership. Offer expires 11/2/22.
  • 6x points at hotels participating in the Marriott Bonvoy® program.
  • 4x points for purchases made at restaurants worldwide, at U.S. gas stations, on wireless telephone services purchased directly from U.S. service providers and on U.S. purchases for shipping.
  • 2x points on all other eligible purchases.
  • Receive a 7% discount off standard rates for reservations of standard guest rooms at hotels that participate in the Marriott Bonvoy program when you book directly. Terms and Conditions Apply.
  • Receive 1 Free Night Award every year after your Card renewal month. Plus, earn an additional Free Night Award after you spend $60K in purchases on your Card in a calendar year. Awards can be used for one night (redemption level at or under 35,000 Marriott Bonvoy® points) at hotels participating in Marriott Bonvoy®. Certain hotels have resort fees.
  • Enjoy Complimentary Marriott Bonvoy Gold Elite Status with your Card.
  • Terms apply.
  • See Rates & Fees