42

My debit card is issued by Visa, but MasterCard AFAIK doesn't differ in that case.

I can use it to pay in shops, online, to reserve place in hotel etc.

I manage to constantly have enough money on my bank account, as I would manage to pay credit card on time, the only difference is, that my 'card limit' is as high as I need it to be - by managing money flow.

I don't consider possibility of 'free credit' and profiting from interests since interests are currently (EU) unreasonably low (under 1 percent) and that percent I could get on the lump sum of purchases doesn't matter for me. AFAIK you don't build credit history in EU by purchasing bananas as well, so if I were to take mortgage, only my previous mortgage would count.

Under that circumstances, would I ever need credit card? Can I approach situation, where MasterCard/Visa debit card would not be accepted and MasterCard/Visa credit card would? Can a merchant know if I give him number of debit or credit card, accepting only 2nd one?

  • 5
    Don't discount the power of rolling over expenses on a line of credit if you can get it without fees. You can get very safe (though small) returns from e.g. a money market fund on the spread between the time you spend and when you pay your bills. Say you keep $10k on your card. Over a year of free credit, that could have made $400 on the S&P (unwise), or $25 on VMMXX, or anything in between depending on your risk tolerance. – Brian Gordon Jul 15 '16 at 4:15
  • 10
    if you think you're going to be able to do normal adult things without establishing credit history, then you are either quite young or live in a country very different from the US. you will. just pay it all down each month. – dbliss Jul 15 '16 at 9:23
  • 16
    "I manage to constantly have enough money on my bank account" Good for you, let's hope that is always and forever going to be the case because, the day it's not, good luck easily paying for gas to get to your next job interview. IMO, it's way too risky not to carry a credit card, irrespective of how you use it. – James Jul 15 '16 at 10:16
  • 13
    Credit history works a lot different in the EU (at least in Germany) than it does in the US. Taking a loan and paying it back won't impact anything at all, except possibly the one bank that gave you the loan trusting you a bit more in the future. There are organizations that may be informed after you fail to pay when a court has ordered you to do so and may share that information only if you agreed to them sharing when you took the loan (ofc, you won't get a loan without signing that), but everything else is impossible due to privacy laws. – Guntram Blohm Jul 15 '16 at 18:48
  • 13
    @dbliss in Europe nobody cares about credit history. The only thing that gets registered is if you don't pay bills. – Glorfindel Jul 15 '16 at 19:59

13 Answers 13

90

The credit card may have advantages in at least two cases:

  1. In some instances (at least in the US), a merchant will put a "hold" on a credit card without charging it. This happens a lot at hotels, for example, which use the hold as collateral against damages and incidental charges. On a credit card this temporarily reduces your credit limit but never appears on your bill. I've never tried to do it on a debit card, but my understanding is that they either reject the debit card for this purpose or they actually make the withdrawal and then issue a refund later. You'll actually need to account for this in your cash flow on the debit card but not on the credit card.

  2. If you get a fraudulent charge on your credit card, it impacts that account until you detect it and go through the fraud resolution process. On a debit card, the fraudulent charge may ripple through the rest of your life. The rent payment that you made by electronic transfer or (in the US) by check, for example, is now rejected because your bank account is short by the amount of the fraud even if you didn't use the debit card to pay it. Eventually this will probably get sorted out, but it has potential to create a bigger mess than is necessary.

Personally, I never use my debit card. I consider it too risky with no apparent benefit.

  • 22
    And +1 for the last line again. – Aganju Jul 14 '16 at 19:51
  • 35
    "Too risky with no benefit?" What in the world are you smoking? The benefit of a debit card is that you can never even possibly run the risk of spending money you don't have (assuming that you're aware of the "overdraft protection" scam and ensure that it isn't active on your account, of course) and end up in debt and having to pay interest. Credit cards are designed from beginning to end to screw you over and make you pay interest--to make you pay more for the things you buy. Why anyone would ever voluntarily do such a thing is beyond me! – Mason Wheeler Jul 14 '16 at 20:36
  • 63
    @MasonWheeler Looks like we may need to agree to disagree, but many people are capable of living within their means and holding a credit card. I've never paid interest to a credit card company and expect that I never will. If you're counting on your debit card getting rejected to keep you in a budget, that seems like a problem way beyond what's covered by this question. I also stated it clearly as my personal preference, so a down vote seems strange in that case unless you think I'm lying about my preference. – user32479 Jul 14 '16 at 20:39
  • 7
    @MasonWheeler At least here in Canada, debit cards are significantly riskier than credit cards because credit cards have a much friendlier chargeback process for fraud. For debit cards, you are liable for the amounts unless you file a police report and go through a lot of paperwork. – Nayuki Jul 15 '16 at 1:43
  • 26
    @MasonWheeler A bunch of extra work? I simply set my credit cards up for automatic payment. Zero work. – Loren Pechtel Jul 15 '16 at 3:08
31

"Need" is a strong word. As far as merchants are concerned, if they accept, e.g., Visa credit, they will accept Visa Debit. The reverse is not necessarily true. Up until lately, Aldi would only accept debit cards (credit cards have higher merchant fees), and when I used to got to Sam's Club, they would accept Visa debit, but not credit (they had/have an exclusive deal with Discover for credit). So, yes, they can tell from the card number whether it's credit or debit. However, I've never heard of a case of the situation being biased against debit.*

That said there are some advantages to having a credit card:

  1. Emergency Funds Too many people consider seeing something they want an "emergency", but if you have a legitimate emergency, your credit limit will almost certainly be higher than what you have in the bank
  2. Fraud Protection With credit cards, if there's a fraudulent charge on a credit card, typically, it's the card issuers problem, not yours. With a debit card, it's much more your problem, and affects you immediately
  3. Rewards It's not hard to find credit cards that offer between 1-5% cash back with no fee. Personally, I don't see a reason not to take advantage (though don't get in the trap of making purchases that you would not otherwise make just for the rewards)
  4. Monthly Payment You mention you don't care about the extra interest you can get from keeping money in the bank (which is fair), but it can be a convenience to just have a single expense once a month. And since the payment is due roughly a month after the statement, it can be easier to plan around it. Probably doesn't apply to you, but it can be much easier to see and react to one big bill coming up instead of many little ones.

ETA: I don't know how credit history works in the EU, but in the US having open credit accounts definitely does affect your credit score which directly affects what rate you can get for a mortgage.

*ETA_2: As mentioned in the comments and another answer, car rentals will often require credit cards and not debit (Makes sense to me that they would want to make sure they can get their money if there is damage to the car). Many credit cards do include rental car insurance if you use it to pay for your rental, so that's another potential advantage for credit cards.

  • I have a couple of ATM cards that double as debit cards, and they have the word "debit" printed on them, so in that case it's certainly easy to tell. In any case this is apparently coded on the mag stripe or the chip. – Jay Jul 14 '16 at 20:02
  • I suspect (but don't know) the number itself could be used. I know for sure that it is possible to uniquely determine the issuer (e.g. Visa, MC, Discover) from just the first 4 digits of the CC# – pwcnorthrop Jul 14 '16 at 20:15
  • 6
    "However, I've never heard of a case of the situation being biased against debit." - A number of car rental companies will not accept debit, or will only accept debit under specific circumstances that don't apply to credit. – Kevin Jul 15 '16 at 4:08
  • 2
    " I don't know how credit history works in the EU" -- We don't have a credit history. Having a good history with a particular bank will improve your chances of securing future credit there, but we have no centralised credit history. We also don't need credit cards for car rentals. A debit card with €250 on it (will get put on hold) is sufficient for the waiver. My bank (KBC bank Belgium) also offers interest-free short-term loans up to €1250 on debit cards. Credit cards are promoted with extra incentives like additional purchase protection or 2 years extra warranty. – detuur Jul 17 '16 at 13:16
  • 1
    The strangest thing about US credit history seen from the EU is that having open credit accounts is considered a good thing. I think banks here reason that having more debt means you're more likely to default, and having open credit lines means you can go into more debt whenever you want. – RemcoGerlich Jul 18 '16 at 7:25
22

Car rental agencies typically accept only credit cards for the rental (you can pay at the end with debit, but the securing during the rental must be a credit card - or a high cash deposit).

Hotel advance-bookings - even if many months in the future - will work fine with a credit card, but - as explained by others - on a debit card, it would directly affect your cash flow (you basically have to prepay instead of just leave the credit card number on file. The same is sometimes true for other advance booking, like cruises, tours, etc.

  • 1
    So they do get information what kind of card I'm using (credit vs. debit) when I book? Or they can check it first when I arrive to rent a car? – GeoLog81 Jul 14 '16 at 20:01
  • 9
    Hertz, Avis, Sixt, Europcar, National, Enterprise.it is not ridiculous, but self preserving. After you took out the first twenty cars with your debit card (with 5 $ in the account), and drove it over the border to sell it, they will learn it the hard way. But maybe in Seattle, that works different - I get this statement every single time I reserve: renter must present major credit card under his name – Aganju Jul 14 '16 at 20:49
  • 4
    Definitely on the cars. I was on a business trip where I ended up unexpectedly picking up the rental car--the guy who was going to do it had a debit card without enough in the bank to satisfy the substantial hold they wanted to place. – Loren Pechtel Jul 15 '16 at 3:10
  • 4
    Building on the comment by @LorenPechtel as regards business trips - I saw a guy denied a hotel room because he wanted to check in with a debit card. He was traveling with his boss and had to get his boss to put his credit card down for the room. In a business travel scenario, going to another merchant isn't always a practical option especially if you're traveling with others. – user32479 Jul 15 '16 at 5:27
  • 2
    Credit card companies also typically provide their own insurance, rather than paying the rental company. But (according to the last rental company I used), the rental company will just charge you(r card) for the damages and it's up to you to deal with getting a refund from your card company. – Wayne Werner Jul 15 '16 at 16:11
20

Possibly not relevant to the original asker, but in the UK another advantage of using a credit card is that when making a purchase over £100 and paying by credit card you get additional protection on the purchase which you wouldn't get when paying by debit card.

E.g. if you buy something costing £100 and the company goes bust before it's delivered, you can claim the money back from the credit card company. Whereas if you paid by debit card, you would potentially lose out.

This protection is a legal requirement under Section 75 of the Consumer Credit Act 1974.

  • 1
    Possibly not, but it does add to the reasons OP should consider a read credit card. – JoeTaxpayer Jul 14 '16 at 23:05
  • 2
    Same in the US, but it applies to all purchases on credit cards, not just over £100. – Navin Jul 16 '16 at 2:43
12

I was hoping to comment on the original question, but it looks to me like the asker lives in the EU, where credit cards are a lot less common and a lot of the arguments (car rental, building up of credit etc) brought forward by people living in the US just don't apply.

In fact especially airlines (and other merchants) will charge you extra when using a credit card instead of a debit card and this can add up fairly quickly.

I hold a credit card purely for travelling outside the EU and occasionally I will travel for work and make my own arrangements, then it can come in handy as I am able to reclaim my expenses before I have to pay my credit card bill (in this case I will also claim the extra credit card fees from my employer). This however is for my personal convenience and not strictly necessary. (I could fill out a bunch of paperwork and claim the costs from my employer as an advance.) In the EU I find that if my VISA debit card will not work in a shop, neither will my credit card, so on that note it's pretty pointless. So to answer the asker question: If you live (and travel) in the EU you don't need a credit card, ever. If you travel to the US, it would be advantageous to get one. Occasionally banks will offer you a credit card for free and there's no harm in taking it (apart from the fact that you have one more card to keep track off), but if you do, set up a direct debit to pay it off automatically. And as other people have said: Don't spend money you don't have. If you are not absolutely sure you can't do this, don't get a credit card.

  • 2
    As an EU citizen, as long as you have a Visa Debit or a Maestro card, you can pay pretty much anywhere. The only use I've ever had for a non-pure debit card is for online transactions. My bank provides me with a pre-paid credit card (you can never overdraft it). I use this to do some transactions with websites out of the EU and in very rare occasions where my debit card doesn't work. Maestro cards also allow for a "hold" to be put on your card. So when you pump gas at an automated pump, €100 is put on hold and the remaining amount later released. – detuur Jul 17 '16 at 12:59
3

The question should be - do you need a debit card? Other than American Express I have to tell my other credit card issuers to not make my cards dual debit/credit.

Using a debit card card can be summed up easily - It creates a risk of fraud, errors, theft, over draft, and more while providing absolutely no benefit.

It was simply a marketing scheme for card companies to reduce risk that has lost favor, although they are still used. That is why banks put it on credit cards by default if they can.

(I am talking about logical people who can control not overspending because of debit vs. credit - as it is completely illogical that you would spend more based on what kind of card you have.)

  • 3
    The question is from a user in the EU, where credit cards are usable in way fewer places than debit cards, get charged extra by the stores, and everyone has a debit card for their bank account by default. – RemcoGerlich Jul 18 '16 at 7:21
  • @RemcoGerlich - That is quite an assumption. I am over in the France, Germany, UK months out of the year. On some trips I don't even get cash. As long as the card has a chip they take it. Never heard of a place only taking debit, sure it happens but the 1000 times I have used my credit card I have never had someone say we don't take that, because its credit. Now a lot of places don't take AMEX so my mastercard and visa are used more. – blankip Jul 21 '16 at 20:35
2

Credit cards are often more fool proof, against over-drawing.

Consider Bill has solid cash flow, but most of their money is in his high interest savings account (earning interest) -- an account that doesn't have a card, but is accessible via online banking. Bill keeps enough in the debit (transactions) account for regular spending, much of which comes out automatically (E.g. rent, utilities), some of which he spends as needed eg shopping, lunch. On top of the day to day money Bill keeps an overhead amount, so if something happens he doesn't overdraw the account -- which would incur significant fees.

Now oneday Bill sees that the giant flatscreen TV he has been saving for is on clearence sale -- half price!, and there is just one left. It costs more than he would normally spend in a week -- much more. But Bill knows that his pay should have just gone in, and his rent not yet come out. Plus the overhead he keep in the account . So there is money in his debit account. When he gets home he can open up online banking and transfer from his savings (After all the TV is what he was saving for)

What Bill forgets is that there was a public holiday last week in the state where payroll is operated, and that his pay is going to go in a day late. So now he might have over drawn the account buying the TV, or maybe that was fine, but paying the rent over draws the account. Now he has a overdraft fee, probably on the order of $50.

Most banks (at least where I am), will happily allow you to overdraw you account. Giving you a loan, at high interest and with an immediate overdraft fee. (They do this cos the fee is so high that they can tolerate the risk of the non-assessed loan.)

Sometimes (if you ask) they don't let you do it with your own transcations (eg buying the TV), but they do let you do it on automated payements (eg the Rent).

On the other hand banks will not let you over draw a credit card. They know exactly how much loan and risk they were going to take. If Bill had most of his transactions going on his credit card, then it would have just bounced at the cash register, and Bill would have remembered what was going on and then transferred the money.

There are many ways you can accidentally overdraw your account. Particularly if it is a shared account.

  • 1
    Remember the question is about the EU though. If there's a public holiday I get paid a day early, not a day late. I have a debit card on my savings account (which I never use), and I can transfer from my savings account to my current account by phone with immediate effect to buy that TV, checking the balance at the same time to make sure it covers my upcoming rent payment. A lot of these examples are sensitive to very specific details of banking practices, and Europe isn't always better than the US but it is different. As are different banks from each other. – Steve Jessop Jul 18 '16 at 13:01
  • Example is merely an example. It could just as easily have been "Bills partner uses their shared card to buy Bill a new phone, cos his was broken". Point being it is possible (with most banks) to mistakenly overdraw a debit account, but not to overdraw a credit card. – Lyndon White Jul 18 '16 at 13:43
  • I've had a US credit card go over the limit from a couple of online transactions fairly close together (about 10-15 minutes apart). So it is possible to overdraw it. – Dragonel Mar 24 '18 at 0:20
2

If you are solvent enough, and organised enough to pay your credit card bill in full each month, then use the credit card. There are no disadvantages and several plus points, already mentioned.

Use the debit card when you would be surcharged for using the credit card, or where you can negotiate a discount for not subjecting the vendor to credit card commission.

2

In most cases, a debit card can be charged like a credit card so there is typically no strict need for a credit card.

However, a debit card provides weaker guarantees to the merchant that an arbitrary amount of money will be available. This is for several reasons:

  • The balance in a checking account is subject to constant variation, possibly to very low values. A credit limit, on the other hand, is more stable in that it doesn't usually drop without warning and is typically higher than a checking account balance. It's also very unusual for a credit card to have an extremely low credit limit (e.g. $100 or less). This can be especially important with large authorization holds.
  • A credit card is backed by the card issuer, while a debit card is backed by the cardholder. If a credit card was used, and the cardholder proves unable to pay for some purchase, the debt is the card issuer's responsibility. With a debit card, the merchant would need to deal directly with a potentially insolvent consumer.

As such, there are a few situations where a credit card is required. For example, car rental companies usually require a credit card.


The following does not apply to the OP and is provided for reference.

Debit cards don't build credit, so if you've never had a credit card or loan before, you'll likely have no credit history at all if you've never had a credit card. This will make it very difficult to get any nontrivially-sized loan. Also, some employers (typically if the job you're applying for involves financial or other highly sensitive information) check credit when hiring, and not having credit puts you at a disadvantage.

  • Citation needed for "Amazon requires a credit card for Prime membership". There are many alternatives to using a credit card to pay for Prime, including: gift of membership, prepaid card, gift card (and none of these are new in the last 3 years). So in essence you're claiming that a membership can be paid for but useless? That's theoretically possible but really needs to be backed up with a link to the policy. – Ben Voigt Dec 8 '18 at 14:32
  • @BenVoigt: It looks like the credit card requirement was removed on August 10, 2016: April 17, 2016 terms - August 10, 2016 terms – bwDraco Dec 8 '18 at 15:11
  • But that only talks about paying for membership, not using Prime. And Prime gift memberships and gift cards (which could be bought with cash) have been around since before 2016, so at most it was a block on paying for membership with a debit card, not an outright requirement to have a credit card. Looks like you edited your answer already; it's now correct. – Ben Voigt Dec 8 '18 at 15:32
0

I haven't had a credit card in fifteen years. I use nothing but my debit card. (I find the whole idea of credit on a micro scale loathsome.) I have yet to encounter a single problem doing so, other than a lower than usual credit score for not keeping 23(!!!) revolving lines of credit open, or that's the number CreditKarma tells me I need in order to be an optimal consumer.

In an nutshell, no, you don't NEED one. There are reasons to have them, but no.

  • I've played Russian Roulette 5 times and lived to tell about it! Russian Roulette is perfectly safe. I lost 30 lbs on that diet, so you know it works. etc, etc... – Jared Smith Jul 18 '16 at 15:05
0

My view is from the Netherlands, a EU country.

Con: Credit cards are more risky.

If someone finds your card, they can use it for online purchases without knowing any PIN, just by entering the card number, expiration date, and security code on the back. Worse, sometimes that information is stored in databases, and those get stolen by hackers!

Also, you can have agreed to do periodic payments on some website and forgot about them, stopped using the service, and be surprised about the charge later.

Debit cards usually need some kind of device that requires your PIN to do online payments (the ones I have in the Netherlands do, anyway), and automated periodic payments are authorized at your bank where you can get an overview of the currently active ones.

Con: Banks get a percentage of each credit card payment.

Unlike debit cards where companies usually pay a tiny fixed fee for each transaction (of, say, half a cent), credit card payments usually cost them a percentage and it comes to much more, a significant part of the profit margin. I feel this is just wrong.

Con: automatic monthly payment can come at an unexpected moment

With debit cards, the amount is withdrawn immediately and if the money isn't there, you get an error message allowing you to pay some other way (credit card after all, other bank account, cash, etc). When a recent monthly payment from my credit card was due to be charged from my bank account recently, someone else had been paid from it earlier that day and the money wasn't there. So I had to pay interest, on something I bought weeks ago...

Pro: Credit cards apparently have some kind of insurance.

I've never used this and don't know how it works, but apparently you can get your money back easily after fraudulent charges.

Pro: Credit cards can be more easily used internationally for online purchases

I don't know how it is with Visa or MC-issued debit cards, but many US sites accept only cards that have number/expiration date/security code and thus my normal bank account debit card isn't useable.

Conclusion: definitely have one, but only use it when absolutely necessary.

  • I'm in the UK, which is arguably part of the EU but probably has somewhat different banking conventions. I can use either my credit or debit card for cardholder-not-present transactions using the card number, expiry and CCV. So before avoiding credit card use on that basis, check whether it's actually any different from your particular debit card. I've had fraud on my credit card and not on my debit card, but the benefit with the credit card fraud was that it never hit my bank balance, only my credit card balance, and was sorted before I had to pay, so I didn't "lose money" even temporarily. – Steve Jessop Jul 18 '16 at 12:35
0

You ask about the difference between credit and debit, but that may be because you're missing something important.

Regardless of credit/debit, there is value in carrying two different cards associated with two different accounts. The reason is simply that because of loss, fraud, or your own mismanagement, or even the bank's technical error, any card can become unusable for some period of time. Exactly how long depends what happened, but just sending you a new card can easily take more than one business day, which might well be longer than you'd like to go without access to any funds.

In that situation you would be glad of a credit card, and you would equally be glad of a second debit card on a separate account. So if your question is "I have one bank account with one debit card, and the only options I'm willing to contemplate are (a) do nothing or (b) take a credit card as well", then the answer is yes, take a credit card as well, regardless of the pros or cons of credit vs debit. Even if you only use the credit card in the event that you drop your debit card down a drain.

So what you can now consider is the pros and cons of a credit card vs managing an additional bank account -- unless you seriously hate one or more of the cons of credit cards, the credit card is likely to win. My bank has given me a debit card on a cash savings account, which is a little scary, but would cover most emergencies if I didn't have a credit card too. Of course the interest rate is rubbish and I sometimes empty my savings account into a better investment, so I don't use it as backup, but I could.

Your final question "can a merchant know if I give him number of debit or credit card" is already asked: Can merchants tell the difference between a credit card and embossed debit card? Yes they can, and yes there are a few things you can't (or might prefer not to) do with debit. The same could even be said of Visa vs. Mastercard, leading to the conclusion that if you have a Visa debit you should look for a Mastercard credit. But that seems to be less of an issue as time goes on and almost everywhere in Europe apparently takes both or neither. If you travel a lot outside the EU then you might want to be loaded down with every card under the sun, and three different kinds of cash, but you'd already know that without asking ;-)

0

Skimmers are most likely at gas station pumps. If your debit card is compromised you are getting money taken out of your checking account which could cause a cascade of NSF fees. Never use debit card at pump.

Clark Howard calls debit cards piece of trash fake visa/mc

That is because of all the points mentioned above but the most important fact is back in the 60's when congress was protecting its constituents they made sure that the banks were responsible for fraud and maxed your liability at $50. Debit cards were introduced much later when congress was interested in protecting banks. So you have no protection on your debit card and if they find you negligent with your card they may not replace the stolen funds.

I got rid of my debit card and only have an ATM card. So it cannot be used in stores which means you have to know the pin and then you can only get $200 a day.

protected by Chris W. Rea Jul 28 '16 at 15:26

Thank you for your interest in this question. Because it has attracted low-quality or spam answers that had to be removed, posting an answer now requires 10 reputation on this site (the association bonus does not count).

Would you like to answer one of these unanswered questions instead?

Not the answer you're looking for? Browse other questions tagged or ask your own question.