Non-Debt Credit Card

[Nashville]

This comes from another thread, but evolves into a different discussion/subject matter.

I made the observation that debit card customers most likely do not have debt as opposed to credit card customers. Taxxcpa responded that his approach involved using a credit card but paying in full so debt does not result.

Personally, I don't have a credit card because of their "gotcha" fee structures, even if they are paid off. However, I would reconsider if the advantages outweight the disadvantages.

I have heard of some of the advantages, but not very much familiar with them. Help me out, if you please.

1. Succinct accounting via end-of-month statements.
2. Ability to protest charges before they are physically paid (tell me more about this).
3. 4. 5. ???

[JohnH]

3) Mileage awards or other benefits for certain affinity cards (airlines, etc)
4) Year-end summaries by account, spending category, etc
5) Limited losses due to stolen or lost card (Debit cards are virtually unprotected)
6) Improvements to FICO scores (debit card usage has no positive effect on FICO scores)

I find credit card transactions a little easier to understand on the statements. A debit card transaction often has limited info on the bank statement, whereas a credit card transaction will include a contact phone number and more identifying detail. So if there's a question, it's usually easy to call the merchant directly. I thin kthis may be true because a credit card statement is oriented strictly toward reporting credit card transactions, whereas a bank statement has to serve multiple reporting purposes (checks, card charges, misc bank transaction types, etc).


Your #2 is no small matter. If you charge for a product or service and the vendor fails to deliver, you can initiate a charge-back process with the credit card issuer. If you pay by check, cash, or credit card, your recourse is usually limited to taking legal action against the vendor. If I get into a dispute, I sure hope it's for something I've charged to a credit card.

[Burke]

Personally, I don't have a credit card because of their "gotcha" fee structures, even if they are paid off. However, I would reconsider if the advantages outweight the disadvantages.I have heard of some of the advantages, but not very much familiar with them. Help me out, if you please.

If you travel on airlines, it is almost mandatory you have one to book flights. Be aware that rewards cards (ones that credit you with miles, points, etc) often have annual fees even if you pay them off each month.

[JohnH]

Burke just reminded me of another set of benefits - small but sometimes useful. If you carry an airline's card, sometimes you get early boarding, shorter check-in lines, or special deals on excess baggage fees. They sometimes set the mileage award levels a little lower for their affinity card holders. Also, using the card to pay for rentals at affiliated car rental places gets you extra frequent flyer miles as well. My card even ofers mileage bonuses for trying specified restaurants.

As Burke pointed out, you almost always pay an annual fee for an affinity card, so you have to decide if the benefits are worth the annual cost before you leap in. The US Airways card currently charges $89/year. I'm not crazy about the airline, but given where I live I have no choice but to patronize them.

[Burke]

For convenience, a credit card is almost mandatory for me. Being able to pump gas and not go into the service station to settle up for instance, espescially in an unfamiliar area when travelling; ordering anything online; booking hotels which usually require a cc for guarantee, etc. I currently have nearly 100K miles on my account I can use for free flights when I can get them, or (most often) for upgrades to first class. And for travelling overseas, it gives peace of mind knowing you can pay with convenience and settle any problems when you get back home. For that purpose, I recommend one which does not charge currency exchange fees.

[Nashville]

3) Your #2 is no small matter. If you charge for a product or service and the vendor fails to deliver, you can initiate a charge-back process with the credit card issuer. If you pay by check, cash, or credit card, your recourse is usually limited to taking legal action against the vendor. If I get into a dispute, I sure hope it's for something I've charged to a credit card.

John, what happens if the dispute cannot be resolved? Who is on the hook?

[FEDUKE404]

Random thoughts on credit cards

I have two credit (never debit!) cards. Balance is paid in full each month. I receive a minimum 1% cash rebate for all charges.....yeah, I even put college tuition on my credit card. Threatened to put a new car purchase on one until the dealer "did the math" and lowered the cash price.

Neither card comes with any fees....gotchas...whatever. But you better learn the rules, such as going over limit or late payment issues or "gotcha" will be an understatement.

You must never have had to rent an automobile or to make online travel reservations???? Virtually a required necessity to have a valid credit card.

As John mentioned, monthly/annual statements help with organizing and review of cash flow. I "write" less than six checks a year.....everything else is done via online bank pay or credit card.

There are other positives which most credit cards have (I don't use them enough) but they include warranty improvement, trip insurance issues, and other "fluff" for purchases made.

In the few rare instances where there has been a bogus/erroneous/duplicate charge, a phone call or two quickly resolved the problem. You also can get a one-time-use linked credit card number for things such as online purchases for a single merchant/event. Keeps your "real" number from rattling around with lesser known merchants.

Of course, all of this may change as banks/vendors try to recoup their expenses....but the card issuers still make plenty of money from my own purchases.

FE

[Burke]

My experience is that most often the cc company can resolve any disputes with the vendor if it is something you did not incur. When travelling overseas, I always book a rental car with a company based in the US. Once in Spain, I went to pick up a car for which I had a confirmation and the local office told me there were no cars for "that price." After some argument I took the car and paid what he was asking. When I returned home, I called the company based in Texas, explained the problem, referred them to my previously confirmed price on their website, and within 2 weeks I had a refund of the difference on my card.

One more caveat: Do NOT under any circumstances use the credit card for cash advances. Trust me. You will get whacked.

[JohnH]

John, what happens if the dispute cannot be resolved? Who is on the hook?

Ron:
I can't answer that question. I've only had a half-dozen disputes in my lifetime and every one of them was settled to my satisfaction. One involved attempted identity theft, several were significant, and the most recent one was simply a matter of a stolen card.

Earlier this year my wife's credit union Visa card was stolen four days before we left for India. It is both a debit card and a credit card. If you enter a PIN it processes as a debit card, but if you tell the merchant it's a credit card, then that's how they process it. Either way, the money comes out of our checking account.

Not having the PIN, the thief ran a couple of small credit card charges just to see if it would work, then they hit WalMart and Best Buy for some bigger ticket items. Total charges within about 24 hours were around $800.

I noticed the odd activity, so I went into the credit union and they immediately blocked the account for all card transactions. I filed a police report, furnished the credit union a copy, signed a sworn statement that it was fraud, and they removed all the charges on a "provisional" basis. They still had some behind the scenes investigational work to do, but when we returned from our trip 2 weeks later, I had a letter saying the case was closed and the provisional charge-backs were permanent.

All that is to say that there is a "provisional" period in place while the issuer gets to the bottom of the matter. I don't know what would happen if the vendor won't cooperate or challenges the complaint.

We use different cards for travel, so this didn't affect our trip in any way. But it was reassuring to know we weren't on the hook for more than $50 at most.

[FEDUKE404]

Yup - not an ATM card!!

One more caveat: Do NOT under any circumstances use the credit card for cash advances. Trust me. You will get whacked.

And from the corner - a VERY loud A-MEN !!!

(Same goes for those little "checks" they send with your monthly statement - shred immediately or even better tell them to quit sending them to you!)

FE

[David1980]

Decent information found here:

http://www.ftc.gov/bcp/edu/pubs/consumer/credit/cre04.shtm

Credit Card Loss or Fraudulent Charges (FCBA). Your maximum liability under federal law for unauthorized use of your credit card is $50. If you report the loss before your credit cards are used, the FCBA says the card issuer cannot hold you responsible for any unauthorized charges. If a thief uses your cards before you report them missing, the most you will owe for unauthorized charges is $50 per card. Also, if the loss involves your credit card number, but not the card itself, you have no liability for unauthorized use.

And for debit cards:

ATM or Debit Card Loss or Fraudulent Transfers (EFTA). Your liability under federal law for unauthorized use of your ATM or debit card depends on how quickly you report the loss. If you report an ATM or debit card missing before it's used without your permission, the EFTA says the card issuer cannot hold you responsible for any unauthorized transfers. If unauthorized use occurs before you report it, your liability under federal law depends on how quickly you report the loss.

For example, if you report the loss within two business days after you realize your card is missing, you will not be responsible for more than $50 for unauthorized use. However, if you don't report the loss within two business days after you discover the loss, you could lose up to $500 because of an unauthorized transfer.

There's more on that site. Just think of it this way: Unauthorized use on a credit card may reduce your available credit, but you're not out any money. Unauthorized use on a debit card may result in you losing money immediately until the bank credits you, and think about bounced checks, etc... You also have better protection / lower liability on a credit card.

It's a no brainer for me. Get a card with no annual fee. Pay it off in full each month. Your cost: $0. Benefits: Reduced liability, possibly cash-back bonuses, rental car insurance, improved credit score, etc...

Edit: Personally, I have been a victim of theft of a debit card number and the bank I was with at the time did nothing to credit the loss. I was out a little over $200 (it was like $800 egyptian). What's the maximum liability for unauthorized use of your debit card number? Had that been a credit card, under today's protections I would have had $0 liability by law.

[joanmcq]

I'm another person that uses credit cards and pays them off monthly. I say 'all of the above', plus my business Discover card, for which I pay no annual fee, gives me 5% cash back on all office supplies, as well as a few other 'biz type' items. So all the paper, toner, the new scanner, envelopes and assorted stuff associated with my biz gets me 5% cash and all other stuff on the card gives me 1%. I keep biz and personal strictly separate.

Most of my personal cards offer more cash back on certain things at certain times. So which card I use for a given type of purchase depends on who is running the 2-5% special at that time (usually gas, hotels, travel, restaurants,etc).

Plus all of the above other reasons. Almost all debit cards now have a VISA charge ability, but I don't like the fact that they will allow almost unlimited access to my bank accounts should they be lost. For credit cards, most businesses in my area also request ID, which they don't for debit cards, which gives me added peace of mind.

[S T]

Debit Cards

I for one (as well as my husband) are not believers in the "Debit Card" and that exposure to theft, and identity fraud.

We carry some cash at all times - but primary purchases for groceries, gas, dept stores, etc are all on Credit Cards. I use one-two credit cards for business purchases, and receive some form of travel miles, or "cash back rewards"

A statement at the end of the month - match statement to receipts - pay at the end of the month - receive a print out from the Card Company, and I am done. Easy to go online track, monitor, and pay online.

The one or two disputes on the Credit Cards that I have had - have been no issue. I have had 3 occasions, where the credit card # was "hijacked" and the Bank actually called me (Fraud Dept) suspended the card and promptly re-issued and overnighted a new card. Card was never lost or stolen - Fraud Dept when questioned said it was just a random incident - These "hijackers" have some type of electronics to produce random credit card numbers - then make the attempt to try the charges to see if the charges will be processed. One was a $ 5,000 cash advance in Las Vegas along with Gas Charges on the way from an area that we didn't even live in, and the bank called me - before I even knew about it.

All was taken care of - and we did not incur any fees/charges.

Besides, I can obtain a 20 - 45 day "float" on my money - not that matters anymore with interest rates being so low.

Sandy

[taxxcpa]

I use Discover card for all business-related purchases and a Chase Freedom card for non-business purchases. I get 1% to 5% rebate on all purchases on these cards.

It simplifies my record-keeping since I just enter the Chase card as "draw" and don't bother scanning it.

[DonPriebe]

Old Joke

... Earlier this year my wife's credit union Visa card was stolen ...

But I didn't report it because the thief spent less than my wife would have.