This topic is very near and dear to me. I prioritize security in a lot of areas of my life. Most people have experienced some kind of activity that left them feeling victimized, and the financial realm is rife with pitfalls and threats lurking around every corner.
Credit cards provide you with the kind of security that neither cash nor debit cards can provide, and this is the number one reason why I use them for as many things as I can. While I enjoy the perks and rewards that credit cards offer, and I owe my credit score to my credit card account activities, I would still be using them if there were no rewards programs, no perks, and no credit score-related factors.
Credit cards provide you with a buffer between your money and the rest of the world. Just like a wall provides physical security between the inside of your home and the outside world, a credit card acts as an intermediary payment method that keeps your checking account safe in a world full of unfortunate mistakes.
I want to start by comparing the security that credit cards provide you over cash. The biggest difference is physical security. Once your cash is out of your hands, it’s gone forever. It could leave your hands because you spent it. It could also leave your hands because your wallet or purse was lost or stolen. There’s also the ever-present threat of a fire.
When I was a child, my parents’ house was burned. Everything inside was destroyed. If you had your money sitting in a box under the bed or stashed away in a box in the closet, and your house caught on fire, your money disappears. It would be as though it never existed. Additionally, when I was a child my wallet fell out of my pocket when I was at a skating rink. I was in elementary school, and my parents gave me $20 to use for food, snacks, and drinks. I fell while skating, and my wallet slipped out of my pocket. When I went to the office to ask if anyone had found it, I was happy to see that someone had picked it up and turned it in…after taking the $20 in cash out of the wallet. Because there was no record of who turned it in or what was in the wallet before it was relinquished, there was nothing I could do.
When your wallet or purse is stolen, lost, or destroyed, your credit card can be reported stolen, lost, or destroyed, and your cash is safe. There is no value in the card, only in what the card represents, which is your debt to the card issuer. The value in cash is in the cash itself. The card swipe records a transaction, resulting in indebtedness, indebtedness between the card issuer and the merchant, and you and the card issuer. The cash is what is valuable (this is not a discussion of the different between cash backed by gold and cash backed by full faith in the US Government, this is more about practical value).
Credit cards are also more secure than using debit cards. Debit cards deduct funds directly from your checking account. Credit cards result in the issuer paying the merchant, and you repaying the issuer. You are reimbursing the card issuer for paying merchants on your behalf. The biggest benefit to using a credit card comes from this distinction.
When your debit card is stolen, the money in your checking account can be drained. Depending on your bank, it can be a lengthy process to get this money back, and there’s no guarantee you will get it back at all. During the process, your account could be frozen, and things like paying bills and handling your paycheck can become difficult. When your credit card is stolen, even if it’s maxed out before the credit card issuer flags the activity as suspicious, you are not liable for any purchase or charge that you did not authorize. The difference between credit and debits cards here is that, even if you aren’t held liable for the debit card activity, credit card activity doesn’t touch the actual cash balance in your checking account until you pay your bill. A thief can rack up $50,000 worth of charges on your credit card, assuming you have the credit limit to allow for that, and you won’t have to pay a cent.
Credit cards provide the same physical benefits over cash, and the same liability coverage and distal security over debit cards, when it comes to checks. While checks aren’t as easy to abuse by a wrong doer as cash, they are easier to abuse than debit cards because they are more difficult to track and report stolen. Checks, which are often mailed in lieu of cash, are also subject to getting lost in the mail or stolen by unscrupulous mail carriers, and this can result in late fees for bills that you’ve attempted to pay by check in the mail.
Finally, there are the issues with purchase protections and chargebacks. Individuals aren’t the only wrong doers of the world. Sometimes merchants and manufacturers are guilty of less-than-ideal business practices. When you’ve paid for a product or service in cash, you are out of luck if you attempt to get a refund and the other party refuses to apologize. With a debit card, you still have to deal with trying to get your cash back through the bank, but it’s definitely easier than using cash. There is a record of your purchase, and your bank might assist you in getting your money back.
With a credit card, you have the zero-liability feature in addition to the timeline buffer of paying your credit card bill after the transaction has taken place. If you spend cash or swipe your debit card the cash is gone either instantly or a few days after the transaction. With a credit card, your money is still in your possession or in your bank account until you pay your credit card bill. This gives you more time before your cash is on the line in the event you need to get a refund.
There are many reasons why you might need to dispute a charge with a company, and if you haven’t experienced that situation yet, it’s likely just a matter of time. When you do need to dispute a charge with a company or you feel like you’ve been taken advantage of, there is no payment method that provides you with more protection than a credit card.
If you have any comments or questions, I’d love to hear them. Please leave a comment below. Thank you reading.
Lance Out Loud 