5 Reasons Why a Credit Card Is Better Than Cash or Debit Cards

In all of my years in the credit industry I’ve never heard anyone use the word “love” to describe a financial services product. That is until I heard someone use the word to describe his feelings toward his debit card. I felt bad popping his bubble when I explained why a credit card is so much better than exclusively using a debit card or, even worse, cash. Here are five big reasons why a credit card is better than cash or debit cards.

1. Try traveling efficiently with a debit card or cash.

The next time you check into a hotel ask the check in agent how much they’ll pre-authorize on your debit card? Most hotels will hold the entire amount of your stay plus more for incidentals. That means the held amount will not be available to cover other transactions. The pre-authorization of funds also applies when you rent a car as well. If you’re paying with cash you better have the entire amount of your stay available to immediately hand over to the check in agent. Point being, credit cards make it easier to travel.

2. What happens if you lose it?

When you lose your cash, either because of theft or an accident, who are you going to call to replace it? There is no one to call.  But, if you were to lose a credit card all it would take is a call to your credit card issuer and it’s very likely a replacement will show up by the next business day. In most cases card issuers will “FedEx” or “UPS” a new card so you don’t skip a beat.

3. What happens if your credit card is stolen?

Credit Card Fraud is all too common and the perception is that it can leave a sinkhole in your bank account.  Thankfully that’s not true at all.  If your credit card is stolen or otherwise compromised you’re not going to lose one penny. The Fair Credit Billing Act caps your liability on credit card fraud to no more than $50, but you’re unlikely to even pay that much. All four or the major credit card networks (Amex, Visa, MasterCard and Discover) have zero fraud liability policies, which means you’re not going to have to pay anything if someone steals your card.

4. What if you want to build or rebuild your credit scores?

If you think cash or debit cards are going to help you build solid credit reports and credit scores, you’re sorely mistaken. Debit Card Transactions are not reported to the credit bureaus because they do not represent extensions of credit. This applies to prepaid debit cards as well—they have no credit building value, at all. Credit cards are the easiest way to build your credit, and you don’t have to take on any debt in order to do so. Using a credit card for garden variety purchases (gas, groceries, dry cleaning) and paying them off either before the due date or the statement closing date is a cheap and easy way to leverage the credit card’s convenience while building credit at no cost.

5. What else in your wallet is worth $30,000?

Have you ever heard the terms “portable capacity?” Portable capacity is a fancy way of saying high value, low drag. It’s not unheard of for credit card credit limits to hit or exceed $30,000. That’s a lot of buying power in plastic form. No way your debit card or prepaid debit card will ever have that kind of buying power. And, carrying around that amount of cash is, well…I don’t even need to finish that sentence.

The bottom line is this; the only value a debit card or cash offers is budgetary control. And if you’re responsible enough that you don’t need budgetary controls (because you can control your own budget) then debit cards and cash are an across the board loser. And while many attempt to vilify credit cards as being evil, a notion that always makes me laugh, there really is no better alternative considering the buying power, fraud protections, credit building benefits and convenience.

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