From ING Direct to Capital One Discover. From fuck Wellsfargo, I'll never do business with them again to two of my subsequent mortgages being sold to them over the last 20 years without my consent. This entire world is designed explicitly to fuck people over at literally every turn as long as someone in the chain somewhere can pocket an extra buck.
But surely if we demonstrate just how evil Nestle is just one more time, the rest of humanity will wake up and boycott them and it will be the end of suffering! Crazy to think I was libertarian minded when I was nineteen. Then again, who could actually maintain it much older? We're talking believing in the tooth fairy levels of delusion wrt to its interactions with the real world.
(Frame of reference: US only) That's a shame, given 18-25 is just the age where a credit card skimmer or online card fraud causing a big fraudulent withdrawal from your checking account, and weeks of waiting to get it back, could be devastating. This has happened to people in my family (likely from gas stations) but we only use credit cards except to pull cash from ATMs, so we only suffer a temporary dip in our available credit line while they investigate and do not have to pay the disputed charges in the meantime.
I know people with terrible credit may have problems getting a credit card, and others may have trouble not treating a credit line as spendable beyond their means, but everyone else should keep the 'debit card' at home or at least confined to their wallet.
> There seem to be a lot of people in this thread who have never actually been through this and are just apeing what other people say online.
I've been through it personally and with friends.
My experience was basically yours. I am a relatively highly paid professional with a large amount of assets with my bank. I get pretty good service, even at my giant national retail bank. I call, make a demand, they tend to just do it without too many questions.
My more low income friends have also gone through it, and I've assisted with them since they were panic'ing. Their experience is absolutely nothing like mine. Every single one spent days to weeks being sandbagged by sometimes the same bank I dealt with on my issue.
Your experience will very greatly depending on how "valuable" of a customer your bank feels you are to them.
> U.S. banks largely give debit cards the same protections as credit cards for at least the last 15 years.
On paper, sure. In practice, no. Funds frozen during an "investigation" matter a whole lot more when it's your money vs. a made up credit limit number that wasn't real to begin with.
I have a friend that got a call/notification that her card was being used suspiciously. It may not have been from the bank. I'm not sure what exactly happened, but then very shortly after, someone else got her newly issued debit card and then used it at an atm in her area. The bank didn't believe that she wasn't involved. And despite filing a police report and giving them all the information that she could, she was out 2.5 grand, which was a big deal for her. BofA if anyone is wondering.
They got her new card and activated it, so they set the pin. I wish I had details because it seemed very sophisticated. So she couldn't have been the only one hit by the scam.
Yikes... That's an interesting angle. Not sure how you would intercept both, I would assume/hope they would be sent separately preferably using different methods
The key with debit cards is the incentive misalignment. With credit, it’s the bank that loses out, not you. With debit, it’s you. Until the consequences are equaled by legislation, there’s no world where they get equal treatment by the bank
it's transaction fraud insurance. like any insurance, you pay a small amount regularly, and in return get protection in case of large sporadic loss.
points are just premiums: some insurance consumers are a greater risk, and so pay more.
any convenience features are built on top of the insurance product: _because_ all players are covered, _therefore_ i can make online purchases. _since_ (i have a justified expectation that) i am not liable for fraudulent use of my account number, _therefore_ i can read it to a customer service rep over the phone.
we can of course debate whether 2% is a good price for this coverage! but there must be some price paid here -- if the insurance broker doesn't collect it, the scammers will. this, after all, is the real tragedy.
My friend, as a rule of thumb, every additional player im a transaction takes a cut.
So assuming the rest is all the same, you just paid exactly what you would've paid with a debit card. Because the merchant had to raise prices to accommodate the fee. And that's with the credit card company not taking a cut and we all know that's not true.
The merchant chose to not offer a lower debit card / cash price because the merchant bets that people will pay a higher price if they use credit cards, so the merchant incentivizes credit card usage by asking for the same price for credit card and non credit card payment.
There are merchants that do not do this, such as Target, which charges 5% to use a credit card. Insurers/tutors/daycares/schools/healthcare providers/contractors/gas stations/restaurants/governments/utilities are also known to frequently charge more for credit card payments.
Any seller can choose to offer a lower price for debit card / ACH / Zelle payments if they want to.
Even ignoring the cut taken by the credit card issuer, why do I have to go through some random card to get a 2% discount, when prices could just be 2% lower across the board by default?
To add on to that: if someone fraudulently uses your credit card, it's the issuer's money that's now missing and they need to get it back. If someone fraudulently uses your debit card, it's your money that's now missing that you need to get back. Hopefully things don't start overdrawing your account in the meantime.
Yes we'll open a dispute. Yes we'll give you a credit immediately. But then we just take the sellers word for it that they're trying to make it right and charge you anyway.
This is my one singular experience with a dispute but that's with a big bank getting almost all of my transactions over the course of years....
A very big percentage of credit card expenses in the US come from cards with rewards programs, so you get money/gift cards/travel discounts in exchange for using the credit card instead of the debit card. A lot of this is funded from much higher interchange fees: It's ultimately the merchant you buy from funding most of the rewards. Since those very high fees are nowadays illegal in the EU, European credit cards cannot have this kind of generosity, and incentives are very different.
How does this work when using a US credit card in the EU? I assume the merchant still pays the lower interchange fee, so are the banks just betting that customers won’t do a large proportion of spending abroad?
They might, and it's good they do, but they're not legally required to in quite the same way that they are with credit cards. If someone pulls $10k out of your BofA account, they're completely within their rights to do basically nothing about it.
I had a friend who had their checking wiped out by debit card fraud. Their bank issued them a provisional credit of $150. So nice. Too bad rent was due in two days and was considerably more than $150.
Slowly over the next three months the charges were slowly reversed. In the end the bank didn't reverse all of them, but my friend did get most of her money back.
It's extremely common advice to not keep large sums of cash sitting in your checking account. With capital one (and others) you can just open a free savings account, keep the bulk in there (if you don't want to invest it instead), which earns an actual interest, and then there's never a "big" amount of vulnerable cash sitting in your checking account. There's free/instant transfers between savings and checking when you need to move more into your checking.
Not a great solution to constantly have to top up your checking account with some amount between "I need this much to pay my bills" and "losing this amount would devastating" which for many people has quite some overlap
Interesting perspective. So, if I'm understanding you correctly, the pitch here would be:
1. Paycheck DD → straight to savings
2. "Spending money" for in-person transactions → transfer periodically to checking
3. Use debit card to spend from checking.
That's an interesting idea. Actually what is intriguing to me is another angle: I'd still never consider spending with debit. But my problem is that it's essentially impossible to get an ATM card that isn't a debit card anymore, meaning if I want to be able to use an ATM, I have to carry this stupid card around that would be easy to use to drain my checking account. With your approach, if I can get a savings account that is not linked to a checking account, I could use that as my default place where I pay my rent and credit card bills from. But it's a big if, because a lot of savings accounts have limits on how many withdrawals they can have per month, probably a residue of that regulation that someone else said was recently repealed.
While Regulation D was lifted a few years ago, there are often still restrictions to the number of withdrawals one can do from a lot of savings accounts.
If most of your income comes from salary/wages, just have the paycheck first hit your normal checking account first and then have scheduled deposits from there into savings accounts someplace else. You generally have enough money in the account to cover your monthly stuff plus a bit of buffer, but have the pile of cash elsewhere in case something happens.
This way you're not actively having to top off your normal spending account, but at the same time have a backstop in case that active account gets hit by fraud or whatever.
I'd suggest protecting yourself even further and having those accounts be split across two different banks. This way if one of your bank credentials gets hacked or you have some issue with the bank you at least have a chance of still having an account with cash someplace else to cover the short term.
Highly recommend this approach. My personal approach has been, for almost 20 years, to have one checking account as Schwab, and the other at a credit union. Schwab has superior offerings for most things, refunds all ATM fees worldwide, and is easy to get on the phone if I have any issue, and the credit union can handle those once-in-5-years (for me) kind of in-person situations like getting a cashier's check, or if I wanted $500 in $100 bills for a gift, etc.
I wish I could scream this from the rooftops. People should keep their debit cards locked/frozen, and only use them to get money from ATMs when needed.
All other spending should go onto credit cards, for numerous reasons that have been bought up throughout this thread.
Stay on your own rooftop please. That is a very US only view.
There's nothing wrong with debit cards being used.
If I can shout one thing back up to your rooftop:
Why on earth do your transactions cost 2 or 3 percent. For what? For basically verifying an RFID chip and adding a single entry to a ledger?
Don't say you're getting it back with points or whatever because we all know that the credit card company won't be going broke so that cut is coming from somewhere. And in the end that's always the consumer
Of course it's a US view. It's a US site and the OP even prefaced it as such. Does every reply need to do the same?
Retailers(in the US) typically eat the cost. Some industries(in the US), like gun shops, are up front about charging more for credit card payments. Most companies(in the US) just see it as cost of doing business.
Points have next to nothing to do with why you should always use credit cards(in the US). There are legal consumer protection reasons. The points are just an optional perk.
This is what I really have a problem with. It feels so incomprehensible to me that, assuming you're an adult, you can think this.
It's just a cost, if that cost didn't exist then either the price would be lower or the margin would be higher. In the end you're paying for it. You're the one exchanging money for a good/service.
This is proven by your other comment about how some sectors give you the option. I would rather have that option because those legal protections are useless for the majority of purchases. Good luck disputing that burrito you bought or those groceries. In such transactions you're basically just inviting a company to take a cut for 0 added benefit (aside from points).
You're confusing costs with pricing. Retailers set the price they show customers to what the market will bear and not a penny less, regardless of their costs. Sometimes they make money. Sometimes they even lose money on an item for strategic reasons. It's only competition that forces prices down though.
So, someone could open up a cash-only chain store and have lower costs that could allow them to price things a couple percent lower, but the absence of that business suggests that they know nobody wants to go to the trouble of paying cash anymore for a savings of a few bucks a month.
I expect that if credit card fees went to 0 tomorrow, no prices would change (though I'd lose thousands in value I get from points each year). Many retailers like grocery operate on thin margins already, so they'd be especially eager to keep the block of cheese at $2.69 instead of dropping it by a few cents.
And even if you could prove that eventually some retailer would give pass on that savings to customers, I still would rather use a card than deal with cash. And stores know that they sell more than they would if (1) everyone had to carry cash everywhere they go and also (2) if people couldn't spend on credit. That's what the retailers are spending 3% on.
> In such transactions you're basically just inviting a company to take a cut for 0 added benefit
Simply not true. Every transaction with a card carries some risk of those cards details being leaked or even an innocent error being made by a cashier or clerk fat-fingering things. Some more than others, and you could maybe argue the risk is minimal - but it's there. Especially in the US where card transactions are less secure on average regardless of debit or credit.
Credit carries significantly more consumer protection in the US. Debit in theory has all sorts of legal protection, but as the other commenter states - in practice it's really spotty.
Even in your scenario of a burrito or grocery purchase credit is going to be much better. So long as you don't make a habit of chargebacks they are typically pretty automatic for most card issuers so long as you present a compelling case. If you're a "valued customer" you tend to get a few freebies before they start to really demand evidence of fraud for such things.
That's a fair argument, and if all companies decided to pass the costs directly on to the user at checkout time, the conversation/advice would probably be a lot different.
For whatever reason most do not, so it's advantageous to use the one with better legal protections. It's not only about purchase protection/disputes, but liability and timelines when/if someone steals your card info and makes a bunch of fraudulent charges. The more places you use a card, the higher the chance that info will get skimmed or stolen.
Luckily, while behind, most places in the US have moved to tap to pay which helps a lot with POS skimming. But it only takes one bad employee to photo or copy your card info, or one poorly configured webstore, to leak your information and use it for online purchases. My most recent credit card doesn't even have numbers or an expiration printed on it, for that reason.
But most debit cards cannot be used with just the numbers. So I can give you my debit card and you can't do anything with it.
You typically need a PIN for any decent purchase. Sure you can tap to pay but that wouldn't be a lot of money fast as it asks for a PIN above a certain amount. That problem of copying the card data is only because it's a credit card and that's all you need to make a purchase.
As to skimming, in Europe there was some active skimming going on in the early 2000s which is why I can't even recall seeing a terminal here that still issues the magnetic strip.
Maybe the terminals don't use the strip, but the cards still have them, so they can still be skimmed, and at least used online, as well as in other parts of the world that do have the magnetic readers.
I think it's possible to write the number to the strip of your cloned card with the bits set to say this is NOT a chip card, so that a terminal won't say "Use chip" -- but clearly the issuer could have the opportunity to notice it odd that the transaction is using the stripe and hopefully subject it to harsher fraud heuristics.
> But most debit cards cannot be used with just the numbers.
Every debit card I have in my wallet right now can be used anywhere a VISA is accepted using the same kind of number as a VISA card. I can go to any website that accepts VISA as payment, type in that same 16-digit number as any other kind of credit card, expiration, and CVV and essentially empty it out in a few minutes.
This has been true across many different banks. I have had ATM-only style cards issued in the past but I haven't encountered one of those in over 20 years.
> those legal protections are useless for the majority of purchases
I think you're misunderstanding the protections we're talking about.
When someone steals my credit card and spends $10k on it, I just dispute it. The charges don't show up on my bill until after the investigation happens, and chances are it will be found in my favor. I continue having my cash in my bank account. Life continues with no changes.
When someone steals my debit card and spends all my cash, I dispute it. They begin their investigation. This means I'm without all my cash for days, maybe weeks, while they do their investigation. Now I can't pay rent. Now I can't buy groceries. My life is pretty messed up at this point.
I've seen it happen to several people personally. It happens all the time.
Not all debit transactions require PIN inputs here in the US. Many can also just go through the credit card networks. For example, all my debit cards in my wallet right now have a VISA logo on them and can run through as if charging a VISA card. I've had other accounts and banks in the past which went through the Mastercard network. However, I do not get any of the extra protections, the money comes straight out of my checking accounts.
On top of that, I can use the card online using the same kind of credit card numbers. This does not require a PIN.
It's a non existent problem in the US, too. The internet likes to blow things out of proportion, but not only are pretty much all payments made with tap to pay for many years now, even when it was magnetic strip, the incidence rate was miniscule.
> In 2023, 21 percent of U.S. consumers experienced financial fraud: 17 percent of all consumers (or 18 percent of consumers who own credit cards) experienced credit card fraud, and 8 percent of all consumers experienced non-credit card fraud (with some consumers experiencing both types of fraud).
Sure, we've now moved to do tap to pay and chipped cards for a lot of transactions. However, this is useless for online orders which just requires knowledge of the magic numbers which all are helpfully printed on the face of the card you hand to people, tell over the phone, or type into websites.
We need to move towards actually secure online payment systems.
Wireless POS card terminals are incredibly cheap, why people need to hand their cards to someone?
Waiter presents me the machine, I insert my card or wave it over the NFC reader of the machine, if I insert the card, machine always ask for pin, if I use NFC, it will ask sometimes based on some obscure criteria.
For really expensive transactions, eventually, I may get a notification on my bank app in the phone, asking me if I am really, really doing this, I authenticate with biometrics and click ok.
> Wireless POS card terminals are incredibly cheap, why people need to hand their cards to someone?
Lots of restaurants and bars have been slow to adopt new systems. While many have moved towards waiters having portable machines and can process the payments table-side, probably half the restaurants and bars I go to expect the waiter/bartender to handle the card.
Few banks/merchants actually require a PIN for transactions most of the time. I couldn't even tell you what the PIN is on most of my credit cards, its never come up on a lot of them even with $1,000+ purchases.
We are moving towards it... if every site accepted both Apple Pay and Google Pay we'd be there. If we got there, you could make the case that we ought to all be able to file all the numbers off of our cards and never need to give them to anyone. But the problem is that even with 99% adoption, those secrets still have to be printed on the cards and used some percentage of the time to support the laggards -- and it only takes one hack or phish to defraud you.
> if every site accepted both Apple Pay and Google Pay we'd be there.
So add another layer of duopoly and middlemen to the way I pay for things. No thanks!
What happens when Google permabans me because I failed to pay a $0.50 cloud bill a few months ago and I got forever locked out of my iCloud account? Guess I can't buy anything online again ever.
Don't get me wrong I've used these for payment processing before, but I'd really prefer some kind of more standardized way of doing payments directly instead of adding yet another middleman. I already have a secure token device with me (the credit card), I should just be able to pay directly with it through the website.
I use Apple Pay a lot, but because I am already carrying a phone and in my country my driver license can be government app in my phone, thus, I don't even carry a wallet most of the time.
But I would hate not to have the option of using my bank card by itself. When I travel, I always carry my wallet and a couple of card, because your phone can die, be stolen, you can be out of charge, etc...
Yes, in the US, if you are disciplined to not spend beyond your means, credit cards are much safer to use than debit. Sadly, the last I checked, financial discipline is not taught in our public schools.
Most 18-22 year olds are living alone for the first time and have just set up their first bank account and are spending all their time focused on studies and trying to get an internship, so they aren't focused on the difference between credit card and debit card, plus they don't spend a lot out anyways
You can still skim the magstripe with a skimmer over a chip reader, even if the original reader doesn't read the stripe. Then you can use that number online, probably to buy gaming currencies, giftcards to flip, etc.
Thankfully the US is very slowly catching up. We actually have NFC at most payment terminals already.
Even better, our small town (pop. 100) gas station upgraded their pumps a while back, and they have NFC! Finally my normal fill-up location is skimmer-resistant. Or is it skimmer-proof?
Put a reader with a shield on the pad and a new pad on top and a small terminal in somewhere out of sight. You won't know the difference. Requires infrastructure though so it is a bit more complicated and a lot more noticeable. Likely used the non-pin entry limit which is always reset after you payed a large amount and had to enter your pin. Not like the strip readers of olden days.
Anecdote: We had a "chip charge" system where you put money in your card via a ATM like device and those sometimes had strange "extensions" in front of it which read your chip while you charged it and immediately took the money. People often don't know what too look for when it comes to skimming devices and with tech it may look like a strange but genuine device.
Ah but you see, chip cards were a French invention so obviously the US is going to turn their head from it and pretend it doesn't exist for more than 20 yrs
People who don't have credit? I used a debit card at one point, though I don't anymore.
But also, they're looking at moving their credit cards to Discover as well, which would make huge waves (both in the credit card/banking world, and for their customers, who would probably find it very annoying).
I suspect the play they're making is that putting millions of new Discover cards out there will be a tipping point, pressuring the remaining merchants who don't take it, as a play to break the Visa/MC duopoly.
This could be not that hard to pull off. American Express historically was less accepted because of their high fees, but I don't think Discover has or had that problem.
Maybe I just don't use it enough but I can really only remember one time in the last ~15 years that I've tried to use my Discover card and been told they don't take Discover. I wonder if there's a geographical component, or if certain industries are less likely to take anything other than Visa/MC?
There is a geographic component. Outside the U.S. acceptance of Discover is not nearly as universal as in the U.S. So much so that in the letter that accompanied the new Discover debit cards they sent out, they had something to the effect of “maybe you should bring a backup card” if you were planning on using it internationally.
Nearly every transaction account in Australia now uses a debit card as the access card, usually Visa debit. Some people will have a credit card in addition to that.
Using my debit card doesn't force the vendor to send 2-3% of the transaction to a company that's in a country threatening to invade mine in exchange for piss poor rewards.
Other than merchant transactions, the CapitalOne MC card was one of the recommended cards for overseas ATM withdrawal, so the transition to a different network with almost zero international coverage has been very jarring.
I'm overseas and have a Capital One MC card which I've never had a problem with regarding ATMs and frictionless payments, so I find this news fairly alarming. Wait—they're planning on killing their MC card and converting all their card accounts to Discover?
I use mine at Costco for purchases over $300 (limit for tap). At least here in Canada, they only accept Mastercard, not Visa, and I don't remember the PIN for my Mastercard.
Setting your incredulity aside, I'm curious why you think using a debit card would be so shocking. I effectively don't use a credit card at all: I use a debit card (or an equivalent Apple Pay representation thereof) exclusively. From my perspective, if I want something and I have the money, I'll pay for it. If I want something and I don't have the money, I won't pay for it. I don't often want things outside my budget (and I am not well-off, as a grad student), so I don't often feel any pressure to amortize the purchase over time with a credit card. And I prefer that state of affairs, because I don't want to get in the habit of using someone else's money if I can't afford to pay them back.
This isn't a value judgment on people who do use credit cards. There are plenty of reasons why using a credit card by default would be appropriate, and I'm not shocked to hear of someone who does so. But I am curious where your shock comes from, so I shared my story as a data point.
Despite the name, many people use "credit cards" simply for rewards and enhanced purchase protections, with only incidental use of the credit facility.
In the US market, it is surprising that someone would choose to use a debit card over a credit card (if they have the choice) because they are giving up the rewards and enhanced purchase protections, which are available at effectively zero cost.
If I used a debit card over a credit card, I'd effectively be paying ~2% more for most things I buy, for no benefit.
Not to mention the grace period. Especially with high interest rates, it's another perk to have thousands of my dollars stay in the bank all month while my credit card bill piles up. This matters less when rates are super low.
One thing I didn't truly appreciate until my wife and I consolidated our spending and had children - having nearly every expense flow through a credit card puts total spending into perspective without having to look through bank statements or keep up a spreadsheet. Getting a $10k bill when you're expecting $8k (or a $30k bill when you're expecting $20k) can be a pretty jarring event and is a built-in monthly touch point to review budgeting and spending.
It wouldn't be quite the same impact spread out over 5 cards paid out of multiple checking accounts with slightly different billing cycles.
> One thing I didn't truly appreciate until my wife and I consolidated our spending and had children - having nearly every expense flow through a credit card puts total spending into perspective without having to look through bank statements or keep up a spreadsheet.
This can work amazingly well for some folks. And can be a spiral of debt for others. This is generally good advice if you can and do actually pay off your credit cards every month. This gets quickly out of control as soon as you don't or won't for one reason or another.
Better fraud protection, too. Depending on the bank it can be a real battle to get fraudulent charges dropped and funds restored, but credit card companies go out of their way to make that process easy. Some even offer it as a function of their site/app so you don’t even need to make a call to get things resolved.
I have several cards and don’t keep a balance on any of them. They’re a tool with several uses, and one of mine is to be able to pay for things without exposing my debit card/bank account.
Because you're leaving 2-3% on the table for every transaction. Using a credit card doesn't mean you can't pay it off in full every month, costing you zero in interest, while taking advantage of reward programs.
On top of all the benefits, if for some reason you get hit with fraud or scammed on a debit card, it's a lot harder to get that money back. Credit is an extra layer of protection.
I've heard this, too, and it's a good reason to use a credit card at least for significant purchases. But I'd rather see those same protections extended to debit cards. I wish I understood why they aren't.
The fees that fund those protections don’t exist on the debit card.
It’s also fundamentally different. There are protections, but they depend on you being aware of the activity to avoid impact. Basically, in the event of fraud with a credit card, Chase or AMEX have a problem. With a debit card you have a problem until the resolve it. In the meantime, your payments and checks may not clear or hit overdraft.
As long as you can control your spending, credit cards are a real superpower for consumers.
I have heard this, and it is probably a flaw in my approach to purchases. But is that really justification to ask "who in the world uses debit cards"? I still feel more comfortable not being on the hook to somebody, and the organizations that extend lines of credit don't do so as a prosocial program, certainly. (Just because some people can safely make use of credit doesn't mean everyone can. I know someone who has unfortunately made poor use of their credit card, and I don't necessarily trust myself to avoid a similar fate.)
No, credit card companies aren't giving out rewards at a loss. Better cards have a higher interchange rate, ie the merchant pays more fees to accept a good card.
Hence why cash discounts are a thing (and yes they're legal again).
You do realize that 2-4% is not left on the 'table' its taken from the merchant you are shopping at. If you are at a big box store sure but when going to local merchants its best for them if you use debit or cash.
One could argue the merchant 'choose' to accept CC but in this day and age its more like extortion because the CC lobbyist were able to make it illegal to pass that charge onto the customer.
At the big box stores absolutely they have it worked in to the prices. I have no idea if the local mom and pop shops are working that 2-4% into their prices or not.
Mom and Pop stores are basically the only places left that reliably give you a cash discount for not using a card. Sometimes advertised at checkout, sometimes you need to ask.
Especially service companies. They tend to quote out "cash" (aka check/bank transfer) price and then add another 5% or so if you want to pay via card. There of course is very often an even cheaper "actual cash" price too you need to ask for if you are so inclined.
> the CC lobbyist were able to make it illegal to pass that charge onto the customer.
This is no longer a thing, there was a settlement with Visa/MC that removed this provision from their merchant contracts. You are now allowed to pass on transaction fees if you feel like it as a merchant.
It was also never illegal. It simply was part of the contract to do accept Visa/MC/Amex and they'd close your merchant account if you got caught doing it.
I had this thought as well. I didn't want to raise it myself, because I don't have any personal evidence that this is the case, but of course the "cash back" has to come from somewhere.
Handling cash costs money too though. I know some small business are credit/debit card only since they do not want to deal with the hassle of cash. Out of everywhere I have been, only one place (some grocery chain in SLC) has accepted debit cards but not credit cards.
You are young, you want to use a credit card to protect yourself and build credit history.
Using a debit card, in the event of fraudulent charges, the money is already gone from your bank account and now you are negotiating with your bank to get it back. With a credit card, you file the claim and its generally resolved before your statement closes and anything is due. Your card will also be immediately cancelled, so if its your debit card you will lose ATM access while awaiting the new card.
This will happen to you many times over the course of your lifetime, maybe every 5-10 years. Usually when a number is stolen, they speed run getting as many $1000s of charges in before the card is stopped, which would drain your debit card account.
Credit history is also important. If you don’t have a credit card and build basic credit history before your first job, you will have trouble signing a lease without a parental guarantor.
That has not been my experience at all. I've been using debit cards for all my everyday non-cash purchases for about thirty years now, and it's worked just fine. I expect to keep doing it indefinitely.
I have had exactly one encounter with fraud: a vindinctive ex-girlfriend stole my card info and had herself a little shopping spree, emptying my checking account. I walked into the credit union branch, filed a report, and walked out with $300 and a new card. All the stolen money was restored within a few days. It was not a big deal.
> All the stolen money was restored within a few days. It was not a big deal.
You just agreed with my premise but that in your case the dollar amount was low enough to be inconsequential. If someone ran up $5k of charges on your card right before you needed to pay rent/mortgage/whatever, this would have been far more annoying.
Also - credit card protects you from this scenario, for free, or in fact pays you money with any of the cash back cards.
The $300 I mentioned was just walking-around money, meant to get me by while they investigated. I don't remember the exact amount that was stolen, but it was not far below your hypothetical $5k. The fraud was inconsequential not because it involved a small amount of money, but because the credit union took care of it promptly, with minimal fuss.
> credit card protects you from this scenario, for free
Sure, but using a debit card issued by my credit union also protects me from this scenario for free, with no risk of getting in debt or having to pay interest. That feels safer to me: fraud is rare, but debt is common, so I'd rather protect myself against debt.
You’re lucky. My colleague had his skimmed at a gas station and his bank froze his funds, causing his mortgage, car loans and other stuff to bounce. Major PITA.
Is it really free money? Actual cash? I've always seen rewards programs advertised in terms of discounts on specific products or services: consumer electronics, cruise vacations, furniture, gift cards, and other things I rarely spend money on. I expect it to be an overstock clearinghouse, something like the old Columbia House record club, where you would page through a catalog of random stuff looking for anything you could convince yourself to settle for, just because you'd already paid for the subscription. It sounds like a hassle and I'd rather ignore it.
Maybe it once was like what you're thinking, but not anymore.
There are fee free cards that give cash back as statement credits (AMEX Blue iirc). No limitations on what you can spend it on. The Apple Card does 2% cash back which you can just transfer to your bank account.
The Amazon card requires a Prime membership, but gives 5% back on anything bought at Amazon. I bought my last TV using the 5% back I had received.
Then there are top tier cards like the Chase Sapphire or Cap One Venture X that have yearly fees. But, if you take 1+ trips/year they immediately pay for themselves and more (credit for global entry, yearly statement credit for travel that almost equals the yearly fee, lounge entry, etc...). I routinely use points from the Venture X to cover travel expenses like tickets, rentals, hotels, eating out, etc...
If you hold $100k in Bank of America (or a linked Merrill Edge account), they will give you up to 5.25% cash back for their credit cards in certain categories, and 2.62% unlimited.
To your point, it's not free money at all: the credit card companies are collecting fees, and the merchants are passing them on to you. This is a way to claw a part of that back - if you don't use a rewards card, you're paying _even more_.
Yes, there's quite a few that just give you actual money: You can get a check back. You often get a better return if you instead purchase things at a specific retailer or something like that, but it's not all gift cards and discounts.
Yes literal dollars I can spend anywhere. It can even be deposited into my bank. For doing nothing at all except paying my normal expenses via my 2% cash back card I get $400-800 annually.
I know I could probably min-max this into more by juggling different cards for things like Amazon and Costco but I'm lazy and don't want to think.
Yes, on some credit cards it's actual 2% cash - Apple Credit Card, Fidelity.
Amazon gives you 5% back for using their credit card, it's criminal not to use it.
If you buy a lot of equipment or expensive equipment - B&H credit card covers sales tax! I.e. 10% for my area! (I don't use it since I don't buy that much, but still it's an option)
For example in New Zealand, EFTPOS cards are very popular (similar to debit cards, but issued directly by our banks so no user fees ever - the merchant pays for the machine and that's it). People usually have all 3 - an EFTPOS card for most in-person purchase (although online EFTPOS is gaining adoption), a debit card for online or paywave-only places, and a credit card for large purchases/ emergencies. Credit cards here are highly unpopular among the under-25 age bracket; most young people just have EFTPOS and debit.
I think this might be a result of our stricter banking regulations compared to economies like the U.S.; it's difficult for banks to offer tempting enough rewards schemes to entice people to credit cards. Additionally, there is much less of a borrowing culture - most people will only ever properly borrow money once - buying a house. Paying cash for cars is the norm, and purchasing anything else on finance is seen as stupid compared to just saving the money (and earning the interest yourself).
I am young, but not so young as that. I do have a credit card, I just don't use it for anything except the monthly cost of server hosting (to keep it in use). Despite its disuse, I have an "exceptional" credit rating, probably mostly due to the age of the account. So I appreciate the point about credit history, but my habit of preferentially using debit doesn't seem to have been to my detriment on that front.
As to fraud protection, I agree, but as noted in another reply, I wish I understood why the protections afforded to credit don't also apply to debit. There must be some systemic reason for it that I'm unaware of. As it stands, my best guess is simply that "it's a perk to entice people to use credit".
The reason is just that it would be more risky, I think. Compare the scenarios:
1. Scammer clones your credit card with a skimmer and pays for $500 of clothes at the mall. You dispute the charges. The funds are actually not given to the store for a bit given that credit transactions take a while to settle. Upon the dispute, the store now needs to prove that you were there and bought those clothes to get their $500, or else the bank/Visa won't pay them.
2. Scammer clones your debit card with a skimmer and pays for $500 of clothes at the mall. You dispute the charges. The store already got paid though. The bank doesn't want to give you another $500 in case you are actually in on the scam, then they'll be out an additional $500. Eventually assuming they can't prove you actually bought the clothes, I think the store would have the $500 confiscated, but usually you're still liable for $50 if you reported it quickly enough, but could be more if you take too long to report the fraud.
Of course debit cards can easily be converted to even easier-to-launder money substitutes, too.
So the protection is that debit cards take longer to pay out to merchants? An increased window to dispute charges doesn't strike me as innovative but more like an arbitrary variable from the CC company.
No, the protection is that when you pay with a credit card, no money has left any of your accounts, and you have plenty of time to dispute the charge before it does.
With a debit card, your money is out of your account, immediately, and you have to fight to get it back. For some banks, for some accounts, this isn't a big deal, and you might have it back in a few hours. But for others it might take weeks, and in the meantime you've failed to pay your rent or mortgage.
Because I get 2 to 3% back on every single purchase and I have my account set up to automatically get paid off every month so I've never paid a fee or interest for a credit card so I basically get free money, extra protection, and better credit just for using a credit card, that's why.
They make money off people who pay interest so I just take advantage of that.
I do the same - I use my debit card for everything, all the time. If I don't have the money to buy something, I'd rather just wait until I do; credit cards make it too easy to spend money faster than I earn it.
People who like to tell other people they shouldn't use debit cards often cite fears of fraud, but that's really never been a problem for me.
I find my usage of credit cards shrinking every year in the US. It's pretty much narrowed down to non Target retail, travel, and restaurants.
As the sellers get bigger and bigger and electronic cash payments become more normalized, I think we'll see more and more sellers charge at least 3%, if not 5% extra for credit cards so that all of their merchant fees and chargeback risk are covered.
Right now, it's just a bet that having the same price for credit card and non credit card will result in sellers willing to pay a higher price (a psychological phenomena), but more and more sellers are not betting on that.
I wonder if the effect of people being more willing to pay higher prices is seen in discretionary purchases, so travel/non staple retail will continue to incentivize credit card usage, while most other businesses will not.
That's like asking "what does rent have to do with property prices?". Just because you've managed to be on the top of this perverse social summation of usury doesn't mean it isn't predatory and a net negative for society.
Credit cards are one of the most insidious ways that banks extract money from those living closest to the margins of poverty. The benefits you gain are a fraction of the profits gained from raking the most vulnerable over the coals of bankruptcy. They're a financial instrument of torture and I refuse to have anything to do with them. I'm not by any means rich, but I'm 48 years old, have zero debt, and will spend the rest of my life avoiding debt.
It has been legal for sellers to ask buyers to pay more if they use a credit card for 15 years now.
There is no "moral" quandary. Sellers that have the same price for credit and non credit payment methods are simply betting that people using credit will be more willing to pay higher prices overall and still buy from them compared to their competitors' with lower prices who charge more for credit cards.
Every year, fewer and fewer of my expenses are paid with a credit card because more and more sellers are not betting on this. My kids' gymnastics class/tutoring/daycare charges 3% or more for credit cards. My home wired ISP and mobile network provider charges 5% more for credit cards. My property tax, insurance, water/sewer utility, all charge 3% or more. Even Target charges 5% for credit cards. Basically all tradespeople that come to fix things on my house charge extra and ask for Zelle/Venmo electronic cash payments instead.
So in all these cases, I do not use a credit card to pay. But the point is, it is up to the seller to decide what price they want to charge for credit and non credit, so there is no "moral" quandary for buyers. No one's hand is being forced.
Edit: to respond to comment below due to hitting posting limit, the extra charge does not go to the card issuer, the seller collects the higher price. If I choose to pay with a non credit card payment as a result of the extra charge for credit cards, then the credit card issuer gets nothing.
Whether or not credit card interest rates and terms are usurious or otherwise morally problematic is not a credit card user's moral responsibility. When I use a credit card, I do not ask or enable or incentivize someone else to be taken advantage of.
The extra charges you are describing are a "cherry on the top" for the card issuers. They could easily survive without those charges (in many countries they do). They also act as a convenient diversion. If you think that's the way they make money you will avoid looking into the other ways they make money. Namely, exhorbitant interest rates on defaulted loans by those who were "sold" credit cards with no practical means of ever servicing the debt.
Sorry, I should have specified I was referring to the US. I would be surprised to learn of any other major country that doesn't allow it though, since the US is considered to be among the most hostile to customer protections.
>A PCN cannot stop you from offering your customers a discount or another incentive for using a certain method of payment, as long as you offer it to all your customers and disclose the offer clearly and conspicuously. For example, you can offer your customers a discount or a coupon if they pay with cash or a debit card rather than a credit card.
No it's actually like asking what cars have to do with debt. You can have a car without going into debt just like how you can have a credit card without debt.
Since you have such high moral standards I hope you don't invest in any index funds because lots of companies in those would probably not live up to your standards
> You can have a car without going into debt just like how you can have a credit card without debt.
Technically this is actually impossible.
You have debt the moment you swipe/dip/tap that card and make a transaction with it.
That you settle the debt before it incurs interest is absolutely not relevant to the types of folks who do not want to carry debt as a matter of principle. I was one for some time while I figured my life out, and even having $100 hanging over my head for a few days was mentally tiring.
It's exactly the same as borrowing $10 from a friend to cover lunch and stressing about remembering to pay them back next week when you see them.
Some people for various reasons simply do not do well with debt at any level. I do now use credit for day to day things and pay it off every month, but that's the only debt I carry. And it is absolutely in every sense of the word debt. It's just debt that has a 30 day interest-free grace period.
Morally, they're also quite problematic, imo. Even if you aren't paying interest because you pay off the balance every month, CC companies can only offer points and cash back and all of that other stuff on the backs of the customers who aren't able to pay it off every month. It's a subsidy of the financially illiterate to those who are. If the predatory 20%+ interest rates were banned, the points and rewards programs would disappear overnight.
I know this isn't popular in the USA, but when compared to the rest of the western world, consumer debt is off the charts insane in America and it doesn't have to be that way. I've lived on both sides of the pond and I much prefer a society where people buy things that they can afford instead of financing everything on the back of a hope and dream that they will for sure pay off the balance this month.
As for the "but muh security!!" argument that I can hear someone typing, having a credit card for security is a terrible argument. You should be lobbying your politicians to regulate financial institutions to build better systems that are not susceptible to such obvious exploits and fraud. Again, much of the world has solved this problem to the point where I can post my bank account number on my business website and nothing bad ever happens. Customers can wire me money directly without approval and I have to manually approve all outgoing transactions at least once (scheduled transfers are still possible); it's not rocket science!
In your moral dilemma your assertion is that the credit card companies are only making money off of people who aren't paying off their cards each month which must mean that people like me are costing them money by paying off each month. Since I'm costing these evil companies money then don't I have a moral obligation to continue using my credit card?
As for saying that the argument that using credit cards because they have more fraud and security measures is not a good argument because the world should be different is also quite silly and naive since arguments should be made based on how the world currently operates not how you wish it might operate in the future. Life is much easier when you live in reality
Credit card companies make money from interest on debt. That is undisputed. To pay out your rewards, they need to make a profit above and beyond what it takes to run the business such that they can afford to give you 2% back. This leads to higher interest rates for everyone that are approaching usurious (imo). Your circular argument about costing the evil company money therefore makes your purchases justified, doesn't make sense.
I agree that the US financial system does not currently operate in a manner that is secure for consumers. I am not naive to that reality (I'm also American and have had various amounts of credit card debt throughout my life, and also times when I paid off balances for years). However, that does not diminish the societal responsibility to advocate for a financial system that is more secure by default. The fact that I need to expose myself to more financial risk in one area to circumvent a shortcoming in another area of the market is a bad thing, in my opinion.
Again, I think if we capped interest rates at something reasonable (12% maybe?), it would force credit card companies to more seriously evaluate if their customers can afford the debt they are incurring and this entire problem would disappear overnight. Sure, there would be less rewards programs as revenue would be decreased, but we would make society better as whole by not incentivising a financial instrument that ruins millions of lives annually. We tried doing it this way for almost 50 years and it doesn't seem to be working out for society if you believe the debt/income ratios as a percentage of GDP in the United States.
As to your last point, I'm much happier living in a reality where I own the things I purchase. Nobody is ever going to repo my car if I lose my job. A sheriff/the state is never going to come to my home and take things to pay off a creditor because I hit the unlucky lottery and was injured in a freak accident or Act of God. Please try to engage my arguments in good faith and not make personal attacks about my separation from reality. The rest of the western world is proof that you do not need debt to participate fully in society.
> Your circular argument about costing the evil company money therefore makes your purchases justified, doesn't make sense.
You are saying they make money off of interest which of course is correct. But I don't pay any interest so by your own logic I'm not contributing to this evil company's profit so how is it a moral dilemma? And how is my argument circular?
> The rest of the western world is proof that you do not need debt to participate fully in society.
I'm not advocating for debt. In fact I have no debt, I even own my house outright. Don't try to argue against things that I never even said :)
The main argument that people who seem upset at my original comment keep making is about how they don't want to take on debt to buy something. Well I absolutely agree. I save and invest the majority of the money I make and I've never bought anything on bad debt in my life. But if you learn the absolute basics behind credit cards you can treat it the exact same as a debit card but you get extra benefits. Not sure what is so hard to understand about that lol
> I'm also American and have had various amounts of credit card debt throughout my life
I think this is the key here. You are probably upset about the poor mistakes that you made in the past and you want to blame other people for it. I fully realize that the majority of Americans can't use a credit card responsibly so I'm glad that you are able to see that for yourself but you shouldn't make wide sweeping arguments about why other people shouldn't use them
> I don't pay interest so I'm not contributing to [their profits]...
That's true, but by accruing rewards, you are indirectly incentivising the CC company to increase interest rates to subsidize your usage. If every single CC user didn't carry a balance, there would be no rewards (see Europe).
I think we ended up at a better place here at the end so I will end with the last point.
When I was 17-19 year old, I had a small credit card with a $3k limit. I never hit this limit and it was never a problem on my path to financial freedom and I largely paid off the balance in full every month. My spouse and I were debt free by 26yo after paying off $75k in student loans. My aversion to consumer debt has little to do with my own experience and more to do with how I see it affecting my friends and family and American society more broadly. We put speed limits on roads to protect people from themselves. I'm only advocating for similar guardrails as it pertains to credit cards and other high interest consumer debt.
Especially after moving abroad, I just don't see the point in a system that is built on top of so much debt. It only hurts the most vulnerable people in society while funnelling money back to people who probably don't need it, imo.
