Will Debit Cards Replace Credit Cards?

Everyone uses debit cards these days. They are the new checks, but faster and easier. Will they replace credit cards altogether?

"For those who use credit responsibly," writes Rich Mintzer on CardRatings.com. "credit cards are still king." You must use credit wisely and avoid getting too deep in debt. Thirty percent of your FICO score is based on debt-to-income ratio so it's important to avoid late or missed payments and not carry big balances.

"Debit cards, since they draw from existing funds in your bank account, are more for convenience than for establishing financial trust," writes Mintzer, "and as such they aren't nearly as powerful a financial tool as a credit card."

Credit cards give you purchasing power, says Mintzer. "Credit cards allow you to make a large purchase, whether a major kitchen appliance or a down payment on a new car, even if the funds designated for such purchases will be forthcoming in your next paycheck."

Both debit and credit cards offer protection from fraud, but credit cards offer a federal mandate, limiting your liability in case of fraud or identity theft. Plus the fact that with a debit card, the funds are taken directly out of your account and will need to be refunded after the dispute is settled.

Credit card companies offer purchase protection that allows you to withhold payment if there is a problem with your purchase that can't be resolved through the merchant. "By contacting the credit card company and disputing the charge, you can prompt an investigation that could potentially result in a refund." writes Mintzer.

Extended warranties are a perk when using a credit card. "Both Visa and MasterCard offer purchase security policies good for 90 days after purchase, meaning that items are eligible for replacement, repair or reimbursement if damaged or stolen." says Mintzer.

Most hotels and rental car agencies require a credit card to reserve a room or car. 'Those (rental car agencies) that let you use a debit card to hold a car will place a hold on the card, typically freezing anywhere from $200 to $500 in your bank account." warns Mintzer.

Mintzer says that, despite the growing surge in debit card use, it's safe to say that the 181 million credit card holders in the United States, roughly 77 percent of the nation's adult population, according to the U.S. Census Bureau, will likely keep credit cards at the forefront of consumer spending power for years to come.

Read 7 Reasons to Choose Credit, not Debit at CardRatings.com.

photo credit: Daquella manera