In our last blog, we listed several reasons why the majority of Canadian consumers prefer to pay with their purchases with credit cards over cash. Among the top benefits are the ability to make big ticket purchases, getting to earn reward points and receiving purchase protection from credit card companies.
Debit cards, it can be argued, are equally as popular as credit cards in Canada.
Using them is like using cash – only it’s not. The major difference, of course, is that debit cards retrieve money from shoppers’ bank accounts in order to complete purchases. Using your own money instead of borrowing money is one of the top reasons many consumers feel debit cards are so desirable.
“Do you like the convenience of credit cards but want to avoid spending money you don’t have?” asks Sarah Brady of Credit Karma, “A debit card could be the answer. Because you’re using your own money from your checking account to pay for your purchases, debit cards can feel more like “real money” and may help you control your spending.”
Debit card users make payments with money they already have.
As Brady notes, that means they don’t have to worry about the fees associated with borrowing money on credit cards. As you know, when extending payment on your credit card accounts, you are charged interest. If payments are not made by their due dates, you also run the risk of being hit with late fees. Not to mention, missed payments will reflect poorly on your credit history.
“You may not earn rewards with a debit card, but you typically won’t have to worry about interest charges or late fees,” notes Brady, “That can be a good trade-off, though it doesn’t give you carte blanche to go on a spending spree. If you’re not careful, you may spend more money than you have in your checking account and incur an overdraft fee.”
Debit cards = money that can’t be stolen.
Another top benefit of debit cards is the peace of mind they give their users. If they become lost or stolen, they can easily be replaced. Cash, on the other hand, is generally gone forever if it falls out of your hands. This is why so many Canadians rarely walk around with any cash on them. It protects them from losing it for good!
“If you get jacked on the streets while shopping, you can rest assured the robber won’t be able to use your card, and if they do, you have the debit card issuer on your side,” writes Financial Samurai, “I never recommend anybody ever put up a fight with a mugger by the way. Your wallet/purse is not worth injury or your life, especially if you have a replaceable debit card.”
Debit cards are ideal for small purchases.
According to Brady, a Federal Reserve study found that “when asked how they would typically make a $10 purchase at a local store, respondents overwhelmingly preferred traditional payment options. More than 37% said they would use a debit card, followed by cash (36.8%) and a credit card (24.3%).”
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