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Ask The Expert: Are Debit Cards Better Than Cash And Credit Cards?
A reader's fiance insists cash isn't king, and credit cards are evil.
Howard Was Asked:

I'm getting married this summer to a wonderful man, and we took your advice and had a real honest talk about money: How much we have, how much we make, and how we like to spend it. Only one thing annoys me, although it might not be a big deal: My fiance buys everything on his debit card. I mean EVERYTHING. Like Big Gulps or a new dishwasher. I have a feeling this is a bad idea, but I can't put my finger on it. All his friends do the same thing, so maybe I'm wrong. Am I?

  -  Ariana  in  Massachusetts

Ask The Expert: Are Debit Cards Better Than Cash And Credit Cards?

No, you’re not wrong, Ariana. In fact, you’re right on many levels.

For example, a few months ago, I read a study that showed more and more Americans are charging even tiny purchases to their debit cards.

‘About six in 10 credit cardholders typically pay cash for purchases of less than five dollars,” CreditCards.com reported back in March. Of those, “27 percent prefer debit cards.”

Meanwhile, cash usage is down 7 percent from 2014.

So your fiance is simply following the crowd. As you know, however, the crowd isn’t always right.

I’m an avid advocate of cash. As I wrote in my second book,  Power Up

Learning to live without a credit card is an integral part of financial empowerment. The lessons you discover will add to your building blocks that will eventually lead to your financial independence. Those who don’t use credit cards take money much more seriously than credit card users. The act of physically handing over the dollars to a cashier or waitress generates a feeling of loss. The money is gone.

That goes double for debit cards, which offer fewer reward perks and less identity theft protection. (Read what happened to a Debt.com editor who had his debit card number swiped. Hint: It didn’t go well.)

The problem with a debit card is that it combines the worst of credit cards and cash. Here’s what I mean…

  • As I said above, when you use plastic, you don’t have that visceral feeling of parting with your hard-earned cash. That debit card is a stand-in, and you don’t feel your earnings draining away.
  • However, a credit card at least gives you a grace period and some points, so while you’re prone to spend more, at least you get something. Debit cards drain your bank account the moment they’re swiped.

Here’s what I might recommend to you newlyweds: Swap your debit card for cash for one month, and if you don’t see a notable drop in the amount of Big Gulps you two buy, then let your fiance slide on his debit-card addiction. While I don’t like it, I also know it’s not worth fighting over — as long as your meeting your other financial obligations and budgeting responsibly.

Have a debt question?

Email your question to editor@debt.com and Howard Dvorkin will review it. Dvorkin is a  CPA, chairman of Debt.com, and author of two personal finance books, Credit Hell: How to Dig Yourself Out of Debt and Power Up: Taking Charge of Your Financial Destiny.