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.

 

[NoTrespassing]

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.

I brought American Express travelers checks with me to the Philippines in 2006. I couldn't cash them anywhere.

 

[MossRoad]

 

[MossRoad]

What will you do? WHAT WILL YOU DO?

 

[dmccarty]

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.

During our last trip out of the country we had a few places that would not accept AmEx. We used our other cards when that happened. The other issue, which is likely not that big of deal now, was the credit card should have a chip and pin, since this was used by many retailers in Europe. We had a few places that would not take the Visa or Mastercard because it was not chipped. I think all of our cards are chipped and have pins now.

One advantage of having good credit, and spending money on the cards, is service. I lost my AmEx card recently. Went to a store, paid by AmEx, went to another store and noticed the card was missing. Paid with a Visa and went back to the other store to see if they had found the card. No card so I called AmEx to cancel the card. They told me that I would not get a new card until the end of December which was not a big deal. Then Customer Service, said, "Oh, we can FedEx a new card to you tomorrow."

We put everything possible on the cards to earn airline points or cash back. Pay off the cards at the end of the month. The plane tickets for our next trip overseas will cost us very little because of the saved up air line miles.

Still not convinced the airline miles are better than just getting cash back though...

 

[two_bit_score]

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.

Seems like a lot more are justifying it every day. The consequences are not what they used to be. I think in the end those of us who actually PAY for what we BUY are paying for all of it anyway.

 

[MossRoad]

Seems like a lot more are justifying it every day. The consequences are not what they used to be. I think in the end those of us who actually PAY for what we BUY are paying for all of it anyway.

Yeah. The only consequences they may have is at worst, they'll be broke with no one to take care of them and they'll be stuck in a government nursing home laying in their own feces on the taxpayers' dime.

 

[two_bit_score]

Yeah. The only consequences they may have is at worst, they'll be broke with no one to take care of them and they'll be stuck in a government nursing home laying in their own feces on the taxpayers' dime.

At that point, to them, it won't matter anyway. They can't see the connection.

 

[scaredychicken]

DEBIT

I hate Credit Cards

I hate Debt

Full Disclosure - I listen to several different sources for Debt Reduction, Debt Free Living, ... including Dave Ramsey and others

 

[Torvy]

DEBIT

I hate Credit Cards

I hate Debt

Full Disclosure - I listen to several different sources for Debt Reduction, Debt Free Living, ... including Dave Ramsey and others

Full Disclosure - I strongly dislike Dave Ramsey. Some of his advice is excellent for anyone. On credit cards, he is dead wrong (unless a person is completely lacking in self control). Like many have noted here, if you use a credit card to pay for your typical and recurring purchases and then pay it in full every month, you are using their money for "free" (or at least at no additional cost to you). Plus, many (most?) cards now offer useful benefits that can earn you additional money.

If I followed Ramsey's advice on credit cards, I would have at least $40,000 USD less over the past 10 years (just on cash back). Hard to calculate beyond that as I would have paid more for insurance, had less money invested, etc.

The reason many people are rich today is that they have learned to manage 'debt'. Rich people make their money work for them. The reason many (most?) people are poor (in US/Canada) is their inability to manage spending, not debt. Of course some of those who don't manage spending then fall into it worse by going into debt and keep spending. I guess they think they are governments...haha.

 

[Oaktree]

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

I had an Amex back in the 70s. I had a job that involved considerable travel, and they (1) had no credit limit and (2) were one of the few CCs that would issue a card to someone under 25 (I was 23 when I got it). Downside was a fairly steep annual fee and you had to pay it off in full each billing cycle. My employer reimbursed the fee, and was reasonably prompt at reimbursing travel expenses so it worked. At the time I primarily needed a CC for hotels and rental cars, and those all accepted Amex. I cancelled that card when I left that job, as I had no further need for it.

I didn't realize that it was widely accepted outside the hospitality industry these days...sure didn't used to be. Discover didn't used to be accepted as much as Visa/Mastercard, but that seems to have changed too.

Given that most CC have some sort of rewards program now, are the CC fees standardized or have merchants just accepted the higher fees now?