"I see you're using your debit card a lot," said the nice man at the bank.
"Yep!" I said, probably with a big dumb grin on my face. That's kind of how I roll when I'm feeling smug about my fiscal responsibility. Debit cards are smart, right? You're spending money that you actually have, and it's out of your pocket instantly. No debt, no mess, no interest, keep track of everything online. Excellent.
"That's not good."
That goes against everything I'd ever been taught: avoid debt. Use the money you have. Use credit cards for emergencies only. So why was the nice man at the bank telling me differently? Was he just after my interest payments, or what?
Well, probably. But it turns out that using credit cards more often is good for consumers, too. Here's why:
That's not just a perk, it's a matter of law. You're only legally liable for $50 in fraudulent credit card charges. Fraudulent debit card charges could cost you up to $500 if you don't report them in time. There's also a matter of logistics – if the bad guys get ahold of your debit card, they could clear out your whole checking account, leaving you with nothing while the fraud claims go through. If they steal your credit card information instead, all you have to do is refuse to pay the fake charges. Your checking account remains untouched, and you can pay your rent on time.
Better credit score.
Without credit cards, you won't have much of a credit score. And you can't get away with having them but never using them, either – not if you want your lenders to love you. The absolute easiest way to improve your credit score is to use your credit cards a lot, but pay off all or most of the balance every month. Yes, every single month. A debit card can't make you look nearly as responsible.
Debit cards are getting better at this, but still, the best rewards programs out there? All for credit cards. We're talking airline miles, rebates, free cash, all the good stuff. And some credit cards offer warranties when you buy big-ticket items, which just isn't something cash can do for you.
There's a huge catch inherent in all this, and you probably know where I'm going. Credit cards are so, so tempting. If you don't pay enough attention, you could be swimming in consumer debt before you know it, with ballooning interest rates and fine-print quagmires. If you're not the kind of person who can use credit cards responsibly, I'm going to take a huge step back on all that advice up there: Stick to debit. You'll sleep easier. But learning to keep credit cards responsibly? That's an excellent life skill – real grown-up level stuff. Credit cards might just force you to keep better track of your spending, and that's better than any rewards program.
Megan Crepeau is a RedEye special contributor. She's a twenty-something college grad navigating this dumpy job market just like the rest of us.