Debit vs. Credit Cards

[Jstpssng]

When I was starting out I had an entry level forestry job for 6-7 months in the summer, and worked for minimum wage at an apple orchard in winter. I had a Sears card and a JCPennys card which I would use in winter, then pay the balance off in summer. By August I would make sure they were paid off and I had money, food, and firewood set aside for the winter.

 

[RSKY]

Back in post #72 I mentioned that getting a couple cards cancelled caused our credit score to drop. It went from 849 to 811.

Don't buy toys on credit. Only use credit/loans etc. for purchasing items or services you must have. A home, main vehicle, or other large purchase. Don't use credit to buy something just because it is on sale.

RSKY

 

[Gem99ultra]

My first credit was back in 1954, age 13. Bought a brand new Schwinn Black Phantom from Lack's Auto Supply for $55, on credit; no interest. That was a lot of money back in '54. Only credit background I needed was a handshake, $5.00 down and promising to pay $5.00/week. (I did have a very good paying job as a janitor at a chemical plant, paying $0.85/hr, which was also good money then.)

In today's world that would be unheard of. Banks & finance companies want a lien on your house and a key to your car. Credit cards are good in many cases. But don't stump your toe and pay one late - you'll regret that for a very long time.

 

[TheMan419]

Debit cards marked with a credit card logo are processed 100% as a credit transaction. The retailers pay the fees the same. The fees are for the processing, not the credit. That is why some banks will give a modest cash back on 'debit'. It works like a secured card. The cash just flows in real time. Half of the retailers (or at least their employees) have no clue and may erroneously give a discount to someone using a debit card that is still costing the retailer.

As for Amex, they are the biggest charlatans in the credit card world. Cards are accepted in 1/5 the places because they charge so much and in most cases, they have a hefty annual fee, to boot. Most of their products are marketed as a charge card, where the full balance is due every month. That is fine for those of us with the financial acumen and/or resources to do that, but the poor schmuck who cannot pays even higher fees than with a credit card with clear revolving credit. There are many credit cards that offer better features for consumers than Amex. Amex has some good features for business use, especially if you have many employees who need a card...of course, the big banks have taken note and often market a business card that will compete.

Debit cards with a Visa/MC/Discover/Amex logo are processed as credit but have lower interchange rates than a true credit card. Significantly so. 90% of my processing volume is debit cards and the cost is dramatically lower than a true credit card.

Amex is accepted at 99% of all retailers that accept credit cards, not 20% as you stated. Yes their interchange rate is a bit higher. Also Amex now offers true credit cards, and many with no annual fee. Your statements about Amex have not been true for at least a decade.

Discover's interchange rate is basically in line with Visa/MC, and they are also accepted at 99% of all places that take Visa/MC.

Visa/MC used to have rules written into their contracts to make it difficult for processors to allow the use of Amex/Discover in the same business, but the got sued over that and had to remove those provisions.

 

[MossRoad]

Back in post #72 I mentioned that getting a couple cards cancelled caused our credit score to drop. It went from 849 to 811.

Don't buy toys on credit. Only use credit/loans etc. for purchasing items or services you must have. A home, main vehicle, or other large purchase. Don't use credit to buy something just because it is on sale.

RSKY

I kinda disagree. If you use credit, and pay it off before it's due, it doesn't cost you anything, and the credit agencies see that you have a good history of using your available credit wisely. That's what they look for..

A history of using your available credit wisely.

That doesn't mean carrying debt. Pay it off completely every month if you can to avoid paying interest. Some folks will tell you that you should keep a balance on your credit cards or mortgage to help build your credit rating, and that's total nonsense. Paying it off every month shows the credit agencies that you know how to use your available credit and don't buy things you can't pay for.

As for not buying something just because it's on sale, that's excellent advice. Buy something because you need it or want it, but avoid the temptation of buying shiny objects.

Also, never go grocery shopping when you're hungry.

 

[Torvy]

Debit cards with a Visa/MC/Discover/Amex logo are processed as credit but have lower interchange rates than a true credit card. Significantly so. 90% of my processing volume is debit cards and the cost is dramatically lower than a true credit card.

Amex is accepted at 99% of all retailers that accept credit cards, not 20% as you stated. Yes their interchange rate is a bit higher. Also Amex now offers true credit cards, and many with no annual fee. Your statements about Amex have not been true for at least a decade.

Discover's interchange rate is basically in line with Visa/MC, and they are also accepted at 99% of all places that take Visa/MC.

Visa/MC used to have rules written into their contracts to make it difficult for processors to allow the use of Amex/Discover in the same business, but the got sued over that and had to remove those provisions.

Thanks for the update.

The changes to Amex are new (since 2020) when they dropped some of their rates because they could not compete.

The lawsuit was because MasterCard and Visa didn't allow partner banks to also issue Amex. The reason Amex has traditionally been less accepted is because the rates they charged merchants was 2x or more compared to the other cards. Retailers have been free to choose.

The 99% acceptance only applies in the US, Amex still lags internationally.

Ultimately, for most people Amex is an inferior card, but for a few it has advantages.

 

[Jstpssng]

Debit cards with a Visa/MC/Discover/Amex logo are processed as credit but have lower interchange rates than a true credit card. Significantly so.

Thank you for pointing that out. I was always under that impression, and years ago when I used my debit card I would try to use it that way. It simply required me to enter my pin.

 

[RSKY]

I kinda disagree. If you use credit, and pay it off before it's due, it doesn't cost you anything, and the credit agencies see that you have a good history of using your available credit wisely. That's what they look for..

A history of using your available credit wisely.

That doesn't mean carrying debt. Pay it off completely every month if you can to avoid paying interest. Some folks will tell you that you should keep a balance on your credit cards or mortgage to help build your credit rating, and that's total nonsense. Paying it off every month shows the credit agencies that you know how to use your available credit and don't buy things you can't pay for.

As for not buying something just because it's on sale, that's excellent advice. Buy something because you need it or want it, but avoid the temptation of buying shiny objects.

Also, never go grocery shopping when you're hungry.

I agree and disagree with you. Let me rephrase it. Don't rack up a credit card balance you cannot pay off without incurring interest. Pay it off ever month.

The last place I worked had a bunch of young guys who got the job and immediately went into debt buying new pickup trucks, four wheelers, wave runners, etc.. When the plant shutdown was announced they were unconcerned because the bank would just repossess what they couldn't pay for. That kind of thinking will end up biting them in the a$$ in the future.

RSKY

 

[TheMan419]

Thanks for the update.

The changes to Amex are new (since 2020) when they dropped some of their rates because they could not compete.

The lawsuit was because MasterCard and Visa didn't allow partner banks to also issue Amex. The reason Amex has traditionally been less accepted is because the rates they charged merchants was 2x or more compared to the other cards. Retailers have been free to choose.

The 99% acceptance only applies in the US, Amex still lags internationally.

Ultimately, for most people Amex is an inferior card, but for a few it has advantages.

I have never had a problem using my Amex internationally either. I pay zero annual fee, get a cash back bonus. Internationally I do pay some kind of processing fee on top of the purchase price. There are cards (Amex and non-Amex) that do not have that fee. Once we start traveling again I will find one of those cards to use when I am out of the country.

I do carry a VISA for that rare instance where Amex is not accepted. I bet I use it less than once a month. I do have some recurring charges go on that card. That way if I need to shut the card down to stop those charges I am not nerfing my main card.

Of course I pay them both off in full every month, so I do not care what the interest rate allegedly is.

 

[MossRoad]

I agree and disagree with you. Let me rephrase it. Don't rack up a credit card balance you cannot pay off without incurring interest. Pay it off ever month.

The last place I worked had a bunch of young guys who got the job and immediately went into debt buying new pickup trucks, four wheelers, wave runners, etc.. When the plant shutdown was announced they were unconcerned because the bank would just repossess what they couldn't pay for. That kind of thinking will end up biting them in the a$$ in the future.

RSKY

I had a longtime childhood friend that went that route. I distanced myself from him many years ago. One day, about 10-15 years ago, he calls me out of the blue and starts telling me that he's on permanent disability from a large shipping company that screwed up his back(true), he was making a living as a used luxury car salesman (true), and a professional ticket scalper (also true). His wife is a Doctor (true). They live in a 3000+ sq ft house on 5 acres in a gated community, have 7 Italian racing hounds, 5 plasma TV's (those were big back then, and all true). He's driving a 2 year old beemer worth $50K. Then he springs this on me....

They're $600K in debt (15 years ago that was a lot).

They pay minimum payments on everything. They don't have children. If they don't like something or don't feel like paying for it anymore, they just return it. That includes the house.

Now think about that for a bit. He's got the most toys, the nice house, wife, etc... and no responsibilities. If they don't make payments, what's gonna happen? The people they owe just take it back.

His whole life appears to be a rental. And he's fine with it.

Sometimes when I hear people with that story, I am reminded of him. I wonder what'll happen to him if he gets sick, needs long term care, etc?

It's not a life for me, but man, I can see how some folks could justify it.