Anytime I am checking out at a convince store, paying for gas, or buying groceries I notice people using cash or debit cards to make purchases. I really do not understand why anyone would pay for something using a debit card anymore. It does not make sense. When using a debit card you are missing out on potential benefits offered from using a credit card.
You are also risking a hacker getting access to your physical bank account and hard earned money. I think the way many of us were taught to use credit is fundamentally flawed, which leads to many people viewing credit cards as evil products. Credit cards today are incredibly useful and since competition among issues is so intense there are several products on the market today that offer a ton of value for little to no annual fee. There are a few reasons why I refuse to use a debit card that I want to share and then I’ll highlight my favorite few cards for everyday use.
Security!
When you swipe your debit card you are opening yourself up to the risk of a hacker gaining your card number and withdrawing money directly from your checking account. Anyone that has had this happen realizes how frustrated it is. Depending on the amount withdrawn it is possible that you will never get all of your money back. I have heard way too many stories of people not fully reimbursed by their bank. Credit cards offer an added layer of security. If the card is stolen, it can be used and a thief can rack up thousands of dollars in charges. Unlike a debit card, this fraudulent activity can be erased from your bill and cost you nothing. Using a credit card for every day purchases can be very helpful in protecting your money.
Points and Cash Back
Debit cards do not offer you anything in return for using them. When you swipe your card the bank pays you nothing in return. With credit cards you can earn cash back or points. I personally prefer points to cash back, but either is a better option than earning nothing in return for your every day spending. Points earning credit cards used to frequently charge annual fees, but more recently credit card issues are adding points and cash back credit cards without an annual fee making opening one of these cards a no brainer.
Building Credit
Using a credit card for everyday purchases can help to improve your credit score. Your credit score is made up of several factors, but using a credit card for daily purchases and paying off your balance in full will help to improve your credit score. An improved credit score leads to lower interest rates on your mortgage or other financing. By using a credit card you are establishing your credit worthiness. Just make sure to pay off the balance in full each month or pay down your credit several times a month to maintain a credit utilization average below 30%.
Below are three of my favorite Debit Card Replacement Credit Cards:
Chase Freedom Unlimited
One of the newest and most interesting cards on the market today is the Chase Freedom Unlimited card. It is a fantastic card for every day use. The card offers 1.5% cash back on every purchase. To put this into perspective, if you spend an average of $1,000/month on general purchases and use this card, you will earn $180.00. You do not have to change anything about your spending habits to earn this extra cash. Open the card, use it as if it were your debit card and pay the balance in full at the end of each month and Chase will pay you!
The card also carries a sign-up bonus of $150 cash back after spending just $500 in the first 90 days. Most importantly the card offers “Zero Liability Protection” meaning you are not held accountable for fraudulent activity on the card. The card also comes with “Price Protection” and “Purchase Protection,” all with no annual fee. This is a fantastic credit card for anyone looking to replace using their debit card for everyday spending.
BankAmericard Travel Rewards
The Travel Rewards card from Bank of America also has no annual fee, but earns points instead of cash back. This card offers the same 1.5% back on all purchases and there is no limit to the number of points you can earn. These points are more like a cash back program than a true points program. To redeem points you book a flight, hotel, rental car, etc. and then apply the points in the form of a statement credit. I do not love this card, but the 1.5% earning rate and 20,000 point ($200) sign-up bonus for spending $1,000 in the first 90 days is generous for not carrying an annual fee.
American Express Everyday
A few years ago American Express launched their Everyday credit cards. The card does not have an annual fee and offers 2x points at grocery stores and 1 point for every other purchase. At the end of the month, if the card has been used more than 20 times, American Express will add 20% to all of the points earned during the month. If you earned 1,000 points in a month and used the card 20 times, you would actually earn 1,200 points.
Unlike the previous two cards mentioned, you are earning true Membership Rewards points. These points can be transferred directly to Airline or Hotel loyalty programs for incredible value. I personally transfer Membership Rewards points to British Airways Avios for a 25% when available. The 10,000 point sign-up offer is a little low, but of the three cards, this is my personal favorite due to the flexibility of Membership Reward points.
I have also included several other cards to consider as debit card replacements:
American Express
- Everyday Preferred Card ($95)
- Premier Rewards Gold Card ($195)
Capital One
- Quicksilver Rewards ($0)
- VentureOne ($0)
Chase
- Freedom ($0)
- Sapphire Preferred ($95)
Bank of America
CitiBank
- Citi Double Cash Card ($0)
- Citi ThankYou Premier ($95)
Wells Fargo
Whatever card you choose, remember to spend responsibly. Use the credit card exactly as you already use your debit card. At the end of each month, pay off your balance in full to maintain and improve your credit score.
