A reader's fiance insists cash isn't king, and credit cards are evil.

3 minute read

Question: I’m getting married this summer to a wonderful man, and we took your advice and had a real honest talk about money: How much we have, how much we make, and how we like to spend it.

Only one thing annoys me, although it might not be a big deal: My fiance buys everything on his debit card. I mean EVERYTHING. Like Big Gulps or a new dishwasher.  

I have a feeling this is a bad idea, but I can’t put my finger on it. All his friends do the same thing, so maybe I’m wrong. Am I?

— Ariana in Massachusetts 

Howard Dvorkin CPA answers…

No, you’re not wrong, Ariana. In fact, you’re right on many levels.

For example, a few months ago, I read a study that showed more and more Americans are charging even tiny purchases to their debit cards.

‘About six in 10 credit cardholders typically pay cash for purchases of less than five dollars,” CreditCards.com reported back in March. Of those, “27 percent prefer debit cards.”

Meanwhile, cash usage is down 7 percent from 2014.

So your fiance is simply following the crowd. As you know, however, the crowd isn’t always right.

I’m an avid advocate of cash. As I wrote in my second book,  Power Up

Learning to live without a credit card is an integral part of financial empowerment. The lessons you discover will add to your building blocks that will eventually lead to your financial independence. Those who don’t use credit cards take money much more seriously than credit card users. The act of physically handing over the dollars to a cashier or waitress generates a feeling of loss. The money is gone.

That goes double for debit cards, which offer fewer reward perks and less identity theft protection. (Read what happened to a Debt.com editor who had his debit card number swiped. Hint: It didn’t go well.)

The problem with a debit card is that it combines the worst of credit cards and cash. Here’s what I mean…

  • As I said above, when you use plastic, you don’t have that visceral feeling of parting with your hard-earned cash. That debit card is a stand-in, and you don’t feel your earnings draining away.
  • However, a credit card at least gives you a grace period and some points, so while you’re prone to spend more, at least you get something. Debit cards drain your bank account the moment they’re swiped.

Here’s what I might recommend to you newlyweds: Swap your debit card for cash for one month, and if you don’t see a notable drop in the amount of Big Gulps you two buy, then let your fiance slide on his debit-card addiction. While I don’t like it, I also know it’s not worth fighting over — as long as your meeting your other financial obligations and budgeting responsibly.

Debit vs Credit

Question: Should I avoid using a credit card? My friends tell me I should just use a debit card instead of a credit card. What you you think?

— Confused in Credit

Steve Rhode answers…

Excellent question. Most people think banks push debit cards because they are a better, smarter personal finance tool. Nothing could be further from the truth. Banks push debit cards because they earn fees from each transaction.

A credit card is a smarter financial tool to use to complete a transaction with more protection. When you hand someone your credit card you are not giving them the authorization to reach into your bank account like with the debit card. The credit card company acts as a buffer between you and the merchant. If there is a problem with the transaction the bank will fight for you without your bank account potentially being involved.

People can use a credit card without carrying debt. In fact, the majority of credit card users never carry a balance. There is nothing that prevents anyone from paying off a credit card balance when they incur it or paying the bill in full before the due date to avoid an interest charge.

Personally, I never use a debit card.

Steve Rhode is the Get Out of Debt Guy. He’s been helping people with personal finance troubles through advice and education since 1994. If you would like to ask a question, visit Get Out of Debt and let Steve help you for free.

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About the Author

Howard Dvorkin, CPA

Howard Dvorkin, CPA

I’m a certified public accountant who has authored two books on getting out of debt, Credit Hell and Power Up, and I am one of the personal finance experts for Debt.com. I have focused my professional endeavors in the consumer finance, technology, media and real estate industries creating not only Debt.com, but also Financial Apps and Start Fresh Today, among others. My personal finance advice has been included in countless articles, and has appeared in the New York Times, the Washington Post, Forbes and Entrepreneur as well as virtually every national and local newspaper in the country. Everyone should have a reason for living that’s bigger than themselves, and besides my family, mine is this: Teaching Americans how to live happily within their means. To me, money is not the root of all evil. Poor money management is. Money cannot buy happiness, but going into debt always buys misery. That’s why I launched Debt.com. I’m glad you’re here.

Published by Debt.com, LLC