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Where I'm from, credit cards are common, but they're not considered the main daily use-case, as opposed to debit cards.
What are practical reasons credit cards are preferred over debit cards in the US?

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    I would suggest you are asking the wrong question as debit and credit cards are complementary products serving slightly different purposes, as is raw cash. I would suggest the more interesting question is "why does the US still use cheques instead of debit cards" as these are substitute products.
    – Ben Adams
    Commented Aug 10, 2014 at 20:26
  • @BenAdams Checks are moribund and in terminal decline in the US. I can't remember the last time I saw someone who didn't look old enough to be retired use one in person; and it's been years since I've had to use one for anything but a very small time organization/entity (ex a landlord not using a management company, a mail fundraiser for a local emergency service organization, a penny-ante local tax whose main purpose appears to be keeping the municipal tax collector employed after changes to the state tax code partially eliminated the old job). Commented Aug 11, 2014 at 14:49

8 Answers 8

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There are several reasons why credit cards are popular in the US:

  1. They are safer--you basically never pay for fraud or theft, even in terms of convenience
  2. They tend to offer rewards
  3. You don't have to worry at purchase time about your account balance
  4. They help build your credit rating
  5. They have other perks like offering free insurance on cars rented with them
  6. You can easily halt or reverse a credit card payment to a vendor that is not behaving well (I guess that's the fraud side)
  7. They are aggressively pushed by banks (who make money on them)

On the other hand, debit cards do not have any of these going for them. A debit card doesn't make much money for the bank unless you overdraw or something, so banks don't have incentive to push you to use them as much. As a result they don't offer rewards other benefits.

Some people say the ability to spend more than you have is a downside of a credit card. But it's really an upside. The behavior of doing that when it isn't needed is bad, but that's not the card's fault, it's the users'. You can get a credit card with a very small limit if this is an issue for you.

The question I find interesting is why debit cards are more popular in your home country. I can't think of any advantage they offer besides free cash back. But most people in the US don't use cash much either. I have to think in your home country the banks have a different revenue model or perhaps your country isn't as eager to offer tons of easy credit to everyone as the US is.

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    Here in Belgium, I have to insert my debit card into a Point of Sale terminal and enter my PIN to verify every payment. This is effectively two-factor authentication: something I know (my PIN) and something I have (my card). It prevents fraud, it protects me from unpleasant surprises at the end of the month and it prevents retailers from overcharging me behind my back. How are credit cards safer than this?
    – Pieter
    Commented Aug 8, 2014 at 18:57
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    @ernie Honestly I'm not sure but I've never been in such a situation. If your card gets stolen, you just call Card Stop and they'll deactivate the card for you so thieves can't use it. I've found the Terms and Conditions of Belgium's biggest bank in English if you'd like to investigate it further. The thief does need to steal both the card and the PIN, otherwise they can't do anything. I should also mention that most Belgian debit cards are 100% free (and without various fees), unlike credit cards.
    – Pieter
    Commented Aug 9, 2014 at 8:11
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    @BobDoolittle I can use my British debit card abroad just as easily as my credit card and I've not noticed any significant exchange rate difference between the two. Is the same not true of US debit cards? Commented Aug 9, 2014 at 11:02
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    @LightnessRacesinOrbit: Are American debit cards that insecure? Belgian debit cards have an electronic chip that you need to insert into a Point of Sale terminal to perform transactions. Every transaction has to be confirmed with my PIN code. Even if they steal my card, they wouldn't be able to use it without knowing my PIN as well. Of course I would like the ability to reverse fraudulent transactions, but I've never had to do it before so I don't know if it's possible with Belgian debit cards.
    – Pieter
    Commented Aug 10, 2014 at 9:10
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    @LightnessRacesinOrbit: And another note on how online banking works in Belgium: you have to insert your debit card into a Digipass and enter your PIN code to generate a temporary login token. You also need to sign most transactions by generating an additional token with your Digipass.
    – Pieter
    Commented Aug 10, 2014 at 9:14
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For me, it is mostly for the fraud protection.

If I have a debit card and someone makes a fraudulent charge the money is removed from my bank account. From my understanding, I can then file a fraud complaint with the bank to recover my money. However, for some period of time, the money is missing from my bank account. I've heard conflicting stories of money being returned quickly while the complaint is undergoing investigation as well as money being tied up for several days/weeks. It may depend on the bank.

With a credit card, it is the banks money that is tied up.

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There are two things I can think of that might be different in other countries:

  • Until 2013, American Express, Visa and MasterCard prevented businesses from charging extra for credit card usage, and credit card surcharges still illegal in several states. Since credit card companies add a surcharge to credit card purchases, and merchants can't pass that onto credit card users, they just make everyone pay extra instead. Since everyone gets charged the credit card surcharge, you might as well use a credit card and recoup some of that via "rewards" points.

  • Almost all credit cards here have grace periods, where you won't be charged interest if you pay back your loans in full within some period of time (at least 21 days). This makes credit cards attractive to people who don't need a loan, but like the convenience that credit cards provide (not carrying cash, extra insurance, better fraud protection). Apparently grace periods aren't required by law here, so this might be common in other countries as well.

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    In Germany it seems to be the default case that credit card debt is paid every month from your current account. I do this and so I don't have the slightly guilty feeling I'd get if I bought something "without paying for it". Having said that, most shops here do not want to see a credit card, and I have had to pay a surcharge in the past. Small businesses don't want to pay the charges.
    – RedSonja
    Commented Aug 8, 2014 at 8:32
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    "Not carrying cash" is not a benefit of credit cards over debit cards. In fact, conversely, "not being able to carry cash [without being charged for it]" is a downside of credit cards versus debit cards. Commented Aug 9, 2014 at 16:58
  • Didn't the law for the first bullet point change so that charging extra is allowed?
    – user541686
    Commented Aug 12, 2014 at 5:33
  • @Mehrdad The credit card companies (Visa, American Express, MasterCard) can't stop merchants from adding surcharges anymore because of a 2013 ruling, but there are still laws in some states that make those surcharges illegal. Commented Aug 12, 2014 at 16:25
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Personally, I use my credit cards for everything because I get reward points (or, cash back, depending on the card), and I build credit history.

I've had credit cards since I was 18 (now 22), and my credit score is in the higher end 700s which I'm told is pretty good for my age. Additionally, since I put my rent and large purchases on my credit card, I have a lot of reward points. I use these to buy things I wouldn't normally buy to try them out and see if they bring any value into my life. If not, I didn't really lose anything, but I have found value in some of those things.

I realize most of this is gamification and consumerism at play, but getting that extra little thing once in a while for "free" which is pretty nice.

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    You do realize that the "free" stuff you get on points is paid for by the fees charged to retailers, who get it by raising their prices to get the money from...you?
    – DJohnM
    Commented Aug 7, 2014 at 17:23
  • @User58220 yes, I'm quite aware - I price-checked the point-to-dollar ratio and it costs, on average, 20$ more than the item on amazon. What else am I going to spend those points on?
    – Seiyria
    Commented Aug 7, 2014 at 18:18
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    @Seiyria seems related: workplace.stackexchange.com/questions/31991/…
    – user12515
    Commented Aug 7, 2014 at 21:11
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    @user58220 at the same time, not like they're going to start marking down the price at the register if they see you're going to pay in cash, so until they do that, Visa 4eva
    – coburne
    Commented Aug 8, 2014 at 19:02
  • User58220 wasn't talking about the point-to-dollar coat when you redeem, but just that retailers prices have all been driven up higher due to credit card users. I'm with @coburne though - my stopping using my card isn't going to cause retailers to lower prices.
    – ernie
    Commented Aug 8, 2014 at 21:21
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Your question is based on a false premise.

Debit cards are more popular in the US than credit cards are.

Indeed it seems to be the non-US part of the world that is big in credit cards. See here for example

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  • It is only with the debt crisis in the US that debit cards have become more popular - because fewer people qualify for credit these days so can't get credit cards. Commented Aug 8, 2014 at 16:34
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    Note that the page you link to only includes credit vs. debit data from Visa and MasterCard, whereas, traditionally, most debit cards e.g. in Europe have been issued by local banks or national payment networks like CB (France) or Girocard (Germany). (Often, these could be dual-use cards combining a Visa / MC credit card with a local debit card.) Indeed, I suspect the strong apparent growth in international Visa / MC debit card use shown in the figures may be at least partly due to European banks increasingly replacing their local debit cards with Visa / MC debit+credit cards. Commented Aug 9, 2014 at 11:59
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  1. Protection from fraudulent charges - If someone steals your card, you will not be liable for fraudulent charges. Call the bank, tell them your card is compromised. They will cancel it and send you a new one. You are still protected if you used a debit card, but it is generally more difficult to reverse fraud.
  2. Charge-backs - If a merchant sells you defective merchandise and refuses to give you a refund, you can have the credit card company issue a chargeback. If you had used cash/debit, you probably would have been out of luck.
  3. Extended warranties - Many cards will extend warranties on items you purchase, often by a year.
  4. Rewards - Most cards offer rewards for using them, often in the form of points you can use to spend on travel, or straight up cash.
  5. Sign-up bonuses - Many cards will give you sign up bonuses if you spend a certain amount within the first few months of opening it.
  6. Hold on to your money for longer - Even if your card isn't in an introductory 0% interest period, you can hold off on paying for a while before interest will accrue. Once your statement is available, you typically have a month or so before the charges on that statement actually accrue interest. This means you can hold on to your money longer if you need to.
  7. Free credit reports - Some cards give you a real monthly credit score for free. An example of this is the Discover IT card.
  8. Builds your credit history - You may want to apply for a mortgage or car loan in the future. Having a good payment history on your credit cards will help you get approved for these big loans and get a good interest rate.
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    I don't know where this idea that there's no fraud protection/chargebacks on a debit card comes from. I've had my bank perform chargebacks on debit card purchases that turned out to be fraudulent before. Maybe some people just have sucky banks? Commented Aug 7, 2014 at 23:39
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    @MasonWheeler How/when did you realize there was fraudulent activity? How long did it take to reverse? Was there still enough of a balance in the account for your other obligations in the mean time? It doesn't take long for other payments out of the account to bounce and by then the damage is done.
    – Mr.Mindor
    Commented Aug 8, 2014 at 14:33
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    @Mr.Mindor: Sure, but how is the story any better with credit cards? Having part of your credit limit temporarily gone can easily cause declined transactions or over-the-limit fees, just as much as having part of your bank balance temporarily gone.
    – Ben Voigt
    Commented Aug 8, 2014 at 20:09
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    @MasonWheeler: Good banks compete for customers by providing fraud protection on debit cards, in contrast to credit cards where the protection is legally mandated.
    – Ben Voigt
    Commented Aug 8, 2014 at 20:10
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    @MasonWheeler in USA legislation, there is extra protection for credit card purchases that don't apply for debit card purchases, thus there is some advantage. For most other countries, the protection is equally good/bad for credit and debit cards.
    – Peteris
    Commented Aug 9, 2014 at 16:15
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The real reason credit cards are so popular in the US is that Americans are lazy and broke, and the credit card companies know how to market to that.

Have you ever heard of the $30k millionaires? These were individuals that purchased as if they were some of the wealthy elite, but had no real money to back it up. American society has pushed the idea of "living on credit" for quite some time now. An idea that is even furthered by watching the US government operate solely on credit. (Raise the debt ceiling much?) Live in America for more than six months and you will be bombarded with "Pre-Approved Deals" with low introductory rates that are designed to sucker the average consumer into opening multiple accounts that they don't need. Then, they try and get you to carry a balance by allowing low minimum payments that could take in the neighborhood of 20 years to pay off, depending on carried balance. This in turn pads the credit companies' pockets with all of the interest you now pay on the account. The few truly wealthy Americans do not purchase on credit.

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    -1 because responsible people use credit cards too.
    – user541686
    Commented Aug 12, 2014 at 5:40
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Credit card fraud protection (by law), credit card cash back programs (provided by most CC issuers), and debit card fees (commonly imposed by the merchant).

The crux is that with CC transactions, a small percentage is remitted to the issuing bank. Since the banks are already making money hand over fist on CC's, they incentivize people to use them.

CC security is also lax because the merchant is responsible for fraudulent charges instead of the bank. If the merchant fails to check a signature, they are held liable for all charges if the card holder reports a fraudulent transaction.

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  • Interchange fees ("a small percentage is remitted to the issuing bank") apply also to debit cards, and liability shift between the merchant and bank also generally is the same if you compare, say, Visa creditcards and Visa debitcards.
    – Peteris
    Commented Aug 9, 2014 at 16:31
  • Then explain me why EasyJet is more expensive with a credit card than with a debit card.
    – yo'
    Commented Aug 11, 2014 at 16:11

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