Skip to content

4 reasons why you shouldn't use your debit card

Jan. 19, 2021
6 min read
This post contains references to products from one or more of our advertisers. We may receive compensation when you click on links to those products. Terms apply to the offers listed on this page. For an explanation of our Advertising Policy, visit this page.

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.

Related: New to The Points Guy? Sign up for our daily newsletter and check out our beginner's guide.

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

Sign up for our daily newsletter

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.

TPG featured card

Best luxury travel rewards card
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards

5X points
5XEarn 5X Membership Rewards® Points for flights booked directly with airlines or with American Express Travel up to $500,000 on these purchases per calendar year.
5XEarn 5X Membership Rewards® Points on prepaid hotels booked with American Express Travel.

Intro offer

Earn 80,000 Points
Earn 80,000 Membership Rewards® points after you spend $6,000 on purchases on your new Card in your first 6 months of Card Membership.

Annual Fee

$695

Recommended Credit

670-850
Excellent/Good
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.

Why We Chose It

Sometimes it's worth a large investment to reap the benefits of a great credit card. That's exactly the case with the Amex Platinum card. In exchange for the annual fee, you'll unlock access to the Amex Membership Rewards program that let you access airline and hotel transfer partners, along with new lifestyle and travel credits. This card is also incredibly rewarding for travel purchases, helping you rack up a ton of Membership Rewards points for your next award trip.

Pros

  • The current welcome offer on this card is quite lucrative. TPG values it at $1,600.
  • This card comes with a long list of benefits, including access to Centurion Lounges, complimentary elite status with Hilton and Marriott, at least $500 in assorted annual statement credits and so much more. (Enrollment required for select benefits.)
  • The Amex Platinum comes with access to a premium concierge service that can help you with everything from booking hard-to-get reservations to finding destination guides to help you plan out your next getaway.

Cons

  • The high annual fee is only worth it if you’re taking full advantage of the card’s benefits. Seldom travelers may not get enough value to warrant the cost.
  • Outside of the current welcome bonus, you’re only earning higher rewards on specific airfare and hotel purchases, so it’s not a great card for other spending categories.
  • The annual airline fee statement credit can be complicated to take advantage of compared to the broader travel credits offered by competing premium cards.
  • Earn 80,000 Membership Rewards® points after you spend $6,000 on purchases on your new Card in your first 6 months of Card Membership. Apply and select your preferred metal Card design: classic Platinum Card®, Platinum x Kehinde Wiley, or Platinum x Julie Mehretu.
  • Earn 5X Membership Rewards® Points for flights booked directly with airlines or with American Express Travel up to $500,000 on these purchases per calendar year and earn 5X Membership Rewards® Points on prepaid hotels booked with American Express Travel.
  • Get $200 back in statement credits each year on prepaid Fine Hotels + Resorts® or The Hotel Collection bookings, which requires a minimum two-night stay, through American Express Travel when you pay with your Platinum Card®.
  • $240 Digital Entertainment Credit: Get up to $20 back each month on eligible purchases made with your Platinum Card® on one or more of the following: Audible, Disney+, The Disney Bundle, ESPN+, Hulu, Peacock, SiriusXM, and The New York Times. Enrollment required.
  • $155 Walmart+ Credit: Cover the cost of a $12.95 monthly Walmart+ membership with a statement credit after you pay for Walmart+ each month with your Platinum Card. Cost includes $12.95 plus applicable local sales tax. Plus Ups are excluded.
  • American Express has expanded The Centurion® Network to include 40+ Centurion Lounge and Studio locations worldwide. There are even more places your Platinum Card® can get you complimentary entry and exclusive perks.
  • $200 Airline Fee Credit: Get up to $200 in statement credits per calendar year in baggage fees and more at one select qualifying airline.
  • $200 Uber Cash: Enjoy Uber VIP status and up to $200 in Uber savings on rides or eats orders in the US annually. Uber Cash and Uber VIP status is available to Basic Card Member only.
  • Get up to $300 back per calendar year on the Equinox+ digital fitness app, or eligible Equinox club memberships when you pay with your Platinum Card. Enrollment required. Learn more.
  • Breeze through security with CLEAR® lanes available at 100+ airports, stadiums, and entertainment venues and get up to $189 back per calendar year on your membership when you use your Card. Learn more.
  • $695 annual fee.
  • Terms Apply.
  • See Rates & Fees
Apply for The Platinum Card® from American Express
at American Express's secure site
Terms & restrictions apply. See rates & fees
Best luxury travel rewards card
TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
Go to review

Rewards Rate

5XEarn 5X Membership Rewards® Points for flights booked directly with airlines or with American Express Travel up to $500,000 on these purchases per calendar year.
5XEarn 5X Membership Rewards® Points on prepaid hotels booked with American Express Travel.
  • Intro Offer
    Earn 80,000 Membership Rewards® points after you spend $6,000 on purchases on your new Card in your first 6 months of Card Membership.

    Earn 80,000 Points
  • Annual Fee

    $695
  • 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

Sometimes it's worth a large investment to reap the benefits of a great credit card. That's exactly the case with the Amex Platinum card. In exchange for the annual fee, you'll unlock access to the Amex Membership Rewards program that let you access airline and hotel transfer partners, along with new lifestyle and travel credits. This card is also incredibly rewarding for travel purchases, helping you rack up a ton of Membership Rewards points for your next award trip.

Pros

  • The current welcome offer on this card is quite lucrative. TPG values it at $1,600.
  • This card comes with a long list of benefits, including access to Centurion Lounges, complimentary elite status with Hilton and Marriott, at least $500 in assorted annual statement credits and so much more. (Enrollment required for select benefits.)
  • The Amex Platinum comes with access to a premium concierge service that can help you with everything from booking hard-to-get reservations to finding destination guides to help you plan out your next getaway.

Cons

  • The high annual fee is only worth it if you’re taking full advantage of the card’s benefits. Seldom travelers may not get enough value to warrant the cost.
  • Outside of the current welcome bonus, you’re only earning higher rewards on specific airfare and hotel purchases, so it’s not a great card for other spending categories.
  • The annual airline fee statement credit can be complicated to take advantage of compared to the broader travel credits offered by competing premium cards.
  • Earn 80,000 Membership Rewards® points after you spend $6,000 on purchases on your new Card in your first 6 months of Card Membership. Apply and select your preferred metal Card design: classic Platinum Card®, Platinum x Kehinde Wiley, or Platinum x Julie Mehretu.
  • Earn 5X Membership Rewards® Points for flights booked directly with airlines or with American Express Travel up to $500,000 on these purchases per calendar year and earn 5X Membership Rewards® Points on prepaid hotels booked with American Express Travel.
  • Get $200 back in statement credits each year on prepaid Fine Hotels + Resorts® or The Hotel Collection bookings, which requires a minimum two-night stay, through American Express Travel when you pay with your Platinum Card®.
  • $240 Digital Entertainment Credit: Get up to $20 back each month on eligible purchases made with your Platinum Card® on one or more of the following: Audible, Disney+, The Disney Bundle, ESPN+, Hulu, Peacock, SiriusXM, and The New York Times. Enrollment required.
  • $155 Walmart+ Credit: Cover the cost of a $12.95 monthly Walmart+ membership with a statement credit after you pay for Walmart+ each month with your Platinum Card. Cost includes $12.95 plus applicable local sales tax. Plus Ups are excluded.
  • American Express has expanded The Centurion® Network to include 40+ Centurion Lounge and Studio locations worldwide. There are even more places your Platinum Card® can get you complimentary entry and exclusive perks.
  • $200 Airline Fee Credit: Get up to $200 in statement credits per calendar year in baggage fees and more at one select qualifying airline.
  • $200 Uber Cash: Enjoy Uber VIP status and up to $200 in Uber savings on rides or eats orders in the US annually. Uber Cash and Uber VIP status is available to Basic Card Member only.
  • Get up to $300 back per calendar year on the Equinox+ digital fitness app, or eligible Equinox club memberships when you pay with your Platinum Card. Enrollment required. Learn more.
  • Breeze through security with CLEAR® lanes available at 100+ airports, stadiums, and entertainment venues and get up to $189 back per calendar year on your membership when you use your Card. Learn more.
  • $695 annual fee.
  • Terms Apply.
  • See Rates & Fees