Ditch Your Debit Card: 3 Reasons to Stop Using it Today
Your debit card is costing you more than you think. Here's what to use instead.
If your budget is in check and your debts are paid off, it’s time for the next move…
Now, if you’re still using your debit card for everyday purchases, stop! It’s costing you in three major ways:
You’re leaving money on the table
You’re at higher risk for fraud
You’re not helping your credit score… at all
Here’s why you should let the debit card collect dust—and what you might want to use for future purchases.
My Debit Experience
I stopped using a debit card at age 19, and it all started after I swiped my brother’s college business book at age 11—I was a nerd; don’t judge me; I owned it.
Here’s how it happened:
I was flipping through pages looking for strategies to use in my lemonade and candy-selling businesses.
Trust me, after a few weeks of rolling rubberbands around $1 bills and getting my first taste of “affluence” balling out at the ice cream truck, I couldn’t think of anything but growing my childhood businesses.
Obviously, the book didn’t have anything immediately useful. But I did find an incredible chapter on credit and how big businesses leveraged it. They called it financial leverage, but I knew it as OPM (other people’s money—my mom’s money).
I was barely old enough to ride my bike three blocks away, let alone get a credit card or a business loan to leverage, but I did keep it in mind for future use.
At 19, knowing that debit cards fueled banks but offered me zero financial benefits, I replaced mine with a credit card and paid my debts in full each month. Then, the doors to OPM started opening.
Here’s the Point
1. Debit Cards Help Banks, Not You
Your bank earns money through interchange fees every time you use your debit card. It also profits largely from account, overdraft, wire, and ATM fees (if you use an out-of-network ATM).
Meanwhile, they rarely offer you cashback, no points for spending money, and no perks for keeping the card and account open—you get nothing in return for using your debit card.
2. Fraud Protection is Weaker Than Other Financial Tools
Debit cards don’t offer the best protection against fraud. Actually, they’re pretty risky.
If someone gets access to your debit card and PIN, the money can be immediately withdrawn from your bank account with very little effort.
Not only that, but banks take weeks (sometimes months) to refund your money—if they do at all.
3. Doesn’t Help Your Credit Score
Not a penny of what you spend on your debit card is ever reported to credit bureaus in your favor.
4. Frequent Holds and Freezes
Hotels, rental cars, and even gas stations frequently place holds on debit cards when you purchase something. This means your additional money is locked up for days. Even if you have the money in your account, you can’t use it until the hold is lifted.
“If all you have is a debit or prepaid card or you pay in cash, it does not report to a credit bureau. If it doesn't report to a credit bureau, it cannot create a credit score for yourself.”
- Suze Orman.
Steps You Can Take Today
Stop letting banks win—if you can use your credit card responsibly, ignore your debit card and start making OPM work for you!
How? Replace your debit card with an excellent rewards credit card. Here’s why:
1. Your money earns cashback, points, and travel rewards!
Every dollar you spend on a credit card benefits you in some way. You can earn 2-5% cashback, travel points toward future flights, or statement credits you can use to pay your bill.
Here’s an example:
If I cash in 120,000 of my 132,614 points, my credit card company will immediately deposit $720.00 into my account.
The trick is to only spend your credit card on things you would buy anyway!
So, for groceries, put them on your credit card. Utilities? Put them on your credit card. Earn Out Loud PRO subscription? Put it on your credit card 😏.
If you approach credit responsibly like this, it can change negative biases toward credit cards, and you can take full advantage of it as a financial tool.
2. Purchase protection!
As previously established, debit card fraud is risky because your money is immediately available to potential thieves.
But credit cards withdraw money from the credit company’s account (not yours) and require further investigation and approval. You are not responsible for money spent due to fraud.
I’ll repeat that—you are not responsible for money spent due to fraud!
3. Perks!
Extended warranties: Your credit card will extend the warranties on big-ticket purchases like TVs and appliances, so there’s no need to buy the extended warranty your favorite department store is trying to sell you.
Travel insurance: Selective insurance is also an added benefit. Your credit company may pay for rental car insurance, luggage insurance, etc. My wife and I use this every time we travel.
Some cards, like American Express, offer monthly allowances for services and entertainment. These might include a monthly stipend for Uber (rides and meals), restaurants, and small local shops. Not to mention the long list of discounts for companies they partner with.
A Word of Caution
I strongly urge you to pay off your debts and consistently stick to a budget before normalizing credit card use.
My goal is to help you improve your finances and then build wealth, not give you tools to jeopardize that. Credit cards require discipline. If you’re still strengthening that muscle, saving this hack for later is okay. Rushing is not what we do here!
Until next time,
Isaiah from Earn Out Loud
PS—If you’re still working to erase your debt, read How to Pay Off $35K, Fast!