Using a Debit card as a Credit

[MarineVietVet]

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@Anonymous wrote:

Thank you!

I have more credit cards than that. I'm better off paying them off and just not using them as opposed to cancelling them, correct?

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Using them wisely is the key. If you put them away and forget about them eventually the lenders will notice and perhaps close the account because of inactivity. What I do is pay a different recurring monthly expense (newspaper, utilities, etc.)  on each card using automatic bill pay. That way I don't have to keep remembering which card I need to use this month. This works well for me. I let one, sometimes two cards report a balance each month to show a small utilization and then PIF before the due date. The other cards I PIF before the statements post.  Except for that last stubborn BoA account which should be history in about 2 weeks. 

7/09
TU-742
EQ-779

Time can heal all wounds and a low FICO. 

[Anonymous]

What would you suggest I do about store cards? I have one that I use maybe once a year.

[pattycake]

tira - don't cancel it.  Use it every couple of months just to keep it active, then pay it right before the statement cuts.  As long as you have lines of credit in good standing that are open, keep them on your report.  They will only help your score.  

Take a few minutes to visit the newbie boards, such as understanding your FICO and others.  You'll find this to be a very welcoming and encouraging community.  I've been able to increase my scores quite a bit since I came here.   

[Anonymous]

Debit cards are a poor substitute for a credit card. You gain better protections, including things like warranty extension and loss coverage, a grace period that can literally be up to 55 days from the day of purchase, absolutely no chance of multiple overdraft fees, and you don't have real money tied up for days in case of fraud, just part of a credit line.

If you monitor everything online and check it everyday you charge something it is very easy to manage a credit card without going out of control on spending. The best cards for daily spending are the ones that tell you exactly what your pending charges are, such as those offered by USAA

[Anonymous]

Alot of people think that the Visa or MasterCard logo means that it helps their credit rating.  It doesn't.  Debit cards with a credit card-type "sign authorization" is all about the process, not the credit.

If you pay with your debit card and punch in your code, it goes through a different process to take the money out of your account, than if you use it as a credit card.  Yes, they both post quickly to your bank account, however, using it as a credit card, usually has more advantages if your debit card is part of a rewards program (i.e. you get more points for using it as a credit card than a debit card).  There's also the added protection of NOT having to put your passcode in. 

Never just let your credit cards sit in a drawer. Use them a few times a year to keep them active.  These days, if you don't close your account, card companies and business are doing it for you.  And that may end up working against you.

Also, the point is to use your credit cards properly, for the right things.  Most people have no clue about the extra benefits they get for using their credit card, because they never read the membership material that comes with it.  There are benefits and protection programs for your purchases and even your own self, for using your credit card - all for free.  Most people waste and leak money because they pay extra for benefits they already get for free. One example is extended warranties.  Many cards offer extended warranties just for using the credit card to make the purchase, and most cardholders never realize it, and pay extra money for an extended warranty anyway.  Wasted money.

The key here is to be informed. Be informed of the product and what it can do for you.  Does it have a banking counterpart that helps to benefit you? If so, then learn the ins and outs.  Your banking and credit card should work together to save you money in the long run.

Store cards are, for the most part, a four letter word, unless you make sure you are PIF.  They offer the worst rates all for that lovely 10% that they gave you on your first purchase.  What you don't realize is, they get it back and more, with their high interest rates that start at 20% and work their way up.

Don't be afraid of credit cards.  You do, however, (and I don't mean YOU...i mean it in the proverbial sense) need to change and take an active role in how and where and when you use your credit card, and how to pay.

Hope this helps!

[Math_Rocks]

Thalia,

Great post and welcome to the forums!

[mcgregorjt]

When you use a debit card linked to a checking account, it is the same as writing a check. It cost money to process a check. This is distributed through the banking system as bank fees such as 6.00/mnth to have an interest account. 

When you run it as a credit, the merchant you run it with pays the fee's, I believe it is 3% of the cost each time a transaction is ran through the system paid to VISA, MC etc.  I always run it as a credit because for my account I am allowed a set amount of debits a month, each additional is 25 cent.

If the debit card is linked to a checking account, it does nothing for your credit.  If it is a major credit card with debit capabilities such as ATM access for cash advance, it is treated like any other credit card purchase, just with a higher interest rate for the advance, plus ATM fee's etc. 

[Anonymous]

Using a debit card instead of a credit card generally is not a good idea... in my opinion and experience. Debit cards have no guarantee against loss due to theft (unauthorized use). They are not usually backed by the banks as credit cards are. For example your maximum loss on theft with a credit card might be $50 and in many cases... $0 if you report it right away. Debit cards open access and potential theft of funds from your checking and savings accounts. The MasterCard and Visa logos pretty much mean nothing except that any place accepting MasterCard and Visa will accept your debit card.

I have had two Discover Cards (stolen identity) rack up more than $6,000. Didn't cost me a dime.. Pain in the butt... but more important... did not cost me anything.

So why would you put yourself at more risk for loss by using a debit card? Even more important... why would you do it with frequency.. daily, weekly, etc.? If you screw up you might lose all your funds... then probably have to open a new account or go to a new bank. Banks aren't going to write off your loss...

I discipline myself to pay the credit card charge a.s.a.p. through online banking (no fee for this)... so I do it within a day or two after the charge. I steer clear of using my debit card as much as I can...

Debit cards are used way too frequently and without regard for potential consequences. It pretty much comes down to either developing bad habits or taking charge to manage your funds.

Message Edited by Maniac on 07-28-2009 05:42 PM

[DI]

Your debit card account is not listed on any of your credit reports.  If you go overlimit and do not pay it, you risk having the balance being sent to collections, at which time it will appear on your credit report negatively as a CA account.

[Anonymous]

Most people are saying that using a debit card instead of a credit card does not help your score. This is true. However, it can keep you from hurting your score. The way the credit scoreing works is that, if you have a lot of credit that you do not use, your score will be higher. Thus, every time you use your credit card, you are risking the chance that your score will go down. Maxed out credit cards or credit cards that carry a high balance are frowned on by banks when you try to get a loan. Therefore, I say use your debit card as much as possible. There are no fees, your score will not be affected, and there is no interest.