Ask the Readers: Debit, Credit or Cash?

by Jason Unger

How do you spend money?

I’ve argued that, when it comes to your spending, you should exclusively use a debit card since it’s essentially the same as cash, it’s convenient, and it’s easily trackable using online banking and other online tools.

But there’s a decent argument for responsibly using a credit card to get rewards and cashback, if you can pay off the balance every month. Louis explains:

But if you can be responsible and pay your credit card in FULL every month, you can usually get pretty good rewards with a credit card and not accrue interest fees.

My biggest worry with using a credit card to make all of my purchases is that I’ll forget to pay the bill or procrastinate and end up carrying a balance.

Then, there’s the argument to only use cash for purchases. When you’re paying with the cash in your wallet, you’re less likely to overspend (like with a credit card) and can effectively use the envelope system.

So, I want to know: do you spend using debit, credit or cash?

Answer the poll below and then let me know why in a comment.

[poll id=”10″]

{ 7 comments… read them below or add one }

Brad @ EOD June 17, 2009 at 2:54 pm

I use a combination of debit and cash. We try to pay our mortgage and utilities online with debit, and use a cash envelope system to take care of everything else.

I personally do not see the “benefit” of rewards and cash back as a good enough reason to have use a credit card. What happens when life drops a bomb that you didn’t expect, giving you the opportunity to justify paying the bill later due to that emergency?

Plus the incentive people have to buy more simply because of the rewards they will receive never seems to matter to them. People have been proven to spend 12%-18% more in studies because of the emotional detachment the piece of plastic offers when buying something as opposed to using cash.

Lastly, I just do not see the point because there are debit cards that now offer some of the same rewards. Another reason CC holders like to give is the security they get, which as I have pointed out many times on my blog is false. Debit cards offer the same protections if used as credit versus debit as proven on the VISA website.

Great question!

Jason Unger June 18, 2009 at 10:06 am

Brad – great comment.

What debit cards do you have that offer rewards? I’d be interested in checking them out.

Lee D June 18, 2009 at 12:23 pm

We endeavor to buy everything on our credit card, including several utility payments that automatically process every month, in order to earn rewards.

Brad makes an excellent point, and this approach requires a lot of discipline to avoid overspending. It’s not easy, but it’s been worth it for us.

Brad @ EOD June 18, 2009 at 3:49 pm

Thanks Jason! I personally do not use one myself, I just know that they are out there. The reason I don’t is because I believe there is still some extra incentive to overspend. Even though the card is attached to your bank account, you are still likely to spend more than if you use cash. I have done it plenty of times myself over the years. Most of the bills we pay with our debit card are already fixed or at least close to the same each month.

I do know that if you go to and click on debit/check card you will be able to find the debit cards that offer rewards.

Ari E-B June 23, 2009 at 11:25 am

Using a debit card over a CC actually has serious security implications. If your credit card is compromised, the issuer is legally responsible for all fraud charges over $25. (Meaning you are out, at most, $25). If your debit card is compromised, you are liable for all charges up to the amount of money in your account at the time of the fraud. In other words, you have a much higher liability is you use a debit card.

Keep in mind that this is what the law is. In the case of fraud MOST issuers will be responsible to all the fraud charges, which is nice for us consumers, but do you really want to find out the hard way what your banks policies on fraud are?

Uchatome June 28, 2009 at 12:13 pm

I am curious, do you forget to pay your electric, or rent (mortgage) so how is a credit card any different? My biggest interest in using credit card over debit card is the security (fraud protection) issues.

“My biggest worry with using a credit card to make all of my purchases is that I’ll forget to pay the bill or procrastinate and end up carrying a balance.”

Jason Unger June 29, 2009 at 6:08 pm

Uchatome — great question. Since I’ve set up automated payments from my main checking account for all of my utilities, etc. I don’t forget to pay them.

With the credit card, I pay my bill in full every month (when I use it) and need to do that manually, since I have no way to set up automatic payments to my credit card from my checking account.

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