Points & Miles

Is it Time to Retire Your Debit Card?

Still using a debit card or non-rewards bank credit card as your main payment method? Now might be the time to retire it and enter the wonderful world of rewards credit cards. Switch to a credit card that offers hotel points, airline miles or cash back. It’s one of the easiest ways to help stretch your dollars further. The money is being spent one way or the other, so why not get a return on your investment? There are a lot of things to consider when making this decision, like sign-up bonuses, earning power, and benefits. These just make things even more complex though. Don’t let this deter you. In the long run, you’ll be able to open the door to experiences you never thought were possible.

There are two reasons why it’s been over a decade since I last used a debit or non-rewards credit card to make a purchase:

    1. Most debit cards don’t offer any type of return on the money I’m spending. The ones that do have a rewards program have a lower rate of return than a credit card.
    2. If my debit card information ever gets stolen, the thieves have direct access to my money. If they have my credit card information, the transactions get wiped immediately and my money is sitting safe and sound in the bank.

To be completely transparent, I used a little green piece of paper to buy lunch the other day. Why? Like they say for Snickers, you’re not you when you’re hungry.

I do understand why debit cards are convenient though. I used to use one as well. The best part was that purchases were instantly paid for and there’s no feeling of owing any money. Two things totally overshadowed that bliss though. What bothered me the most was the holds. If I bought gas and filled up my tank for $30, I still had a $75 hold from the gas station that tied up my money for a few days. The other thing is overdraft fees. One time I attempted to pay a bill online but the session timed out after I submitted the payment. Thinking the payment didn’t go through, I attempted the transaction again. This time it did go through, and then a few days later I was hit with several hundred dollars in overdraft fees because the first payment actually was processed. If I was using a credit card, there would have been a lot less headache.

401(K) 2012“Wallet and Credit Cards” by 401(K) 2012 is licensed under CC BY-SA 2.0

Theoretically, if the money is available to make a purchase on a debit card, then the money should also be available to pay off the credit card bill in full each month. Treat a credit card the same way as a debit card and there should be no problems making the transition. I’ve always felt it would be extremely helpful to get a return on your everyday spend. This feeling is amplified now that I’m a parent.

Choose Your Own Adventure

You may already have points or miles built up the old fashioned way. If you’re a frequent customer of a specific hotel or airline, then you have a lot of incentive to continue that relationship with a co-branded credit card that allows you to earn extra points or miles in your favorite loyalty program. You’ll be able to build up your balances and redeem rewards a lot sooner than you think. Be aware that many co-branded cards carry annual fees. While this may seem like a deal killer, it’s important to be aware that the value of the benefits you receive can far outweigh the cost of the annual fee.

A new shift in credit card rewards is to earn points into a bank’s own rewards program, which can then be transferred to specific hotel and airline partners. For example, Chase created their Ultimate Rewards program with credit cards like the Sapphire Preferred and the Freedom. The cards earn Ultimate Rewards points and those points can be transferred to hotels like Hyatt and Marriott, or airlines like Southwest and United. These types of cards are good to have because they protect against program devaluations.

They say “cash is king” so if you want to roll with a cash back credit card, then you have a plethora of options.

Earn 2 percent cash back on all purchases with the Citi Double Cash, or grab a card that offers rewards for different categories of spending, like the new Costco Anywhere card or American Express Blue Cash. There is no shortage of cash back cards available so you should be able to find one that complements your spending habits and financial goals.


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