Tori Dunlap: Credit Cards Are In, Debit Cards Are Out

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The financial influencer makes an excellent argument for only using credit cards. 

Credit cards and debit cards are the most popular payment methods, but which is the better choice? Money expert Tori Dunlap recently covered this subject on an episode of her podcast, Financial Feminist.

Dunlap says she never uses a debit card and instead puts everything on her credit cards. While this may seem like a great way to end up in debt, it’s actually a smart strategy, as there are several advantages of credit cards over debit cards. Here’s why Dunlap prefers credit cards and if it’s a good idea to follow her approach.

Debit cards are not as secure as credit cards

Debit cards and credit cards both have fraud protections, but there are some key differences. Dunlap correctly points out that your debit card is directly connected to your bank account. Your credit card isn’t. That means a credit card offers a crucial extra layer of protection.

If someone steals your debit card or the card number and is able to use it, the money comes out of your bank account. You can report it as fraud and potentially get your money back, but it’s still a stressful situation. With a credit card, you don’t need to worry about this. If someone gets ahold of your credit card, all they can do is put charges on your bill. The card issuer will remove those charges when you dispute them as fraud.

Also, the amount of fraud you’re legally liable for with a debit card depends on how quickly you report your card lost or stolen. Most credit cards have zero liability guarantees, meaning you’re not liable for any fraudulent transactions.

Credit cards usually offer better rewards

Rewards are an area where credit cards have a huge advantage over debit cards. The best rewards credit cards offer outstanding value. You can find cards with sign-up bonuses worth $300 or more and that earn cash back or points on your purchases.

Dunlap says she puts everything she buys on her credit card. This is an easy way to max out your credit card rewards, and it’s a smart move, as long as you pay your bill in full every month. By paying your card’s full balance, you don’t get charged any interest.

Savvy cardholders often save hundreds and sometimes even thousands of dollars per year with credit card rewards. Although there are rewards debit card options, they don’t offer nearly as much value. They typically have much lower rewards rates without the bonus opportunities that credit cards offer.

It’s important to build credit

Dunlap says your credit score is like your “adulting GPA,” which is a great metaphor I’d never heard before. There are all kinds of situations where your credit score can come into play, including:

Buying a home or car: When you apply for a loan, the lender will check your credit.Renting an apartment: Most landlords require a credit check to decide if they’ll rent to you and how much of a security deposit they’ll require.Getting the best deal on insurance: In most states, insurance carriers can use your credit score to set your rates.

To build credit, you need to borrow money and pay it back, either through a credit card or loan. A credit card makes it easy to do that. You can simply use a credit card at least once per month, pay the bill by the due date, and your credit score will go up.

Using a debit card doesn’t improve your credit. Since you’re spending money directly from your bank account, you’re not borrowing money, which means this activity doesn’t affect your credit.

Tracking purchases is easier

The final reason that Dunlap likes credit cards is because they categorize your spending for you. While this is nice, it’s not that big a deal, for a couple of reasons.

First, every card issuer is different in regard to the tracking tools it offers. You might like the way your card issuer helps you track your spending, or you might never use this feature.

In addition, there are plenty of tools available to track spending, no matter which type of payment card you’re using. For example, many popular budgeting apps connect to all your financial accounts, including debit and credit cards.

Should you only use credit cards?

Dunlap added an important caveat to her advice — if you’re in credit card debt, then it’s definitely okay to use a debit card. In fact, that’s normally the better option in that situation, at least until you’ve paid off your credit card balances.

In addition, to benefit from credit cards, you need to use them like a debit card. That means only paying for purchases you can afford with the money in your bank account. Your spending should stay the same as before, only you pay with credit cards to reap their benefits.

If you’re not in credit card debt, and you’re confident you’ll always pay in full, then using credit cards for every purchase is highly recommended. It’s more secure, you’ll be able to earn rewards on your spending, and you’ll be building your credit.

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