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Why You Lose Money When Using a Debit Card

Updated: May 6

For around 3,000 years bloodletting—the practice of using leeches to withdraw blood from the human body—was a common practice in an attempt to prevent or "cure" a patient from an illness or disease. In the 19th century, this practice was discredited and physicians discovered that it resulted in leaving patients weak and vulnerable from blood loss.

What is one lesson learned? Some practices are deeply entrenched within us—and can contribute to negative consequences.

On a smaller and lighter scale, using your debit card for a transaction could have negative consequences—such as paying more for the item purchased and losing out on other credit card perks.

AwardYourMiles discusses the value of using a credit card versus a debit card.
You may be sad—or even mad—when you learn how much you could have saved over the years using a credit card. Image courtesy of Unsplash

All opinions and reviews expressed herein are the author's alone and have not been reviewed or approved by any credit card issuer, airline, bank, hotel chain, or other entity. Some of the credit card offers and links appearing in this article are from companies from which we may receive commission or a referral bonus when you click on the link. You do not need to use our links but we appreciate it when you do—it helps support our website!

Why Do I Pay More Using a Debit Card?

When you use a debit card for a purchase, the transaction will typically be deducted directly from your checking account within a few days. When you use a credit card, something different happens. The transaction will post to your account established with the credit card issuer within a few days. Once the billing cycle ends, you have at least 21 days to make the minimum payment—or a greater amount—to the card issuer. Why would I pay more using a debit card if the original transaction amount is the same in both scenarios?

The simple answer—credit card rewards and more! A lot of credit card issuers incentivize using their credit cards by offering miles & points—including large welcome bonuses. In addition, there may be shopping portals and other creative ways to stack your rewards. Learn more about these methods in the following post: Double-Dipping—Making Your Miles & Points Go Further!

However, an often overlooked way to save even more money is to take advantage of offers exclusively available to cardmembers. These offers include receiving a statement credit after purchasing with an eligible merchant. American Express and Chase are well-known for making these types of offers available. However, a cardmember will need to add the offer to their account—simply by selecting the merchant after logging in to their account. What makes this a powerful savings tool is a cardmember can still use a promo code or coupon with the purchase—and still receive the statement credit!

An Example of Paying Less by Using a Credit Card

Let's use an example to see how this works. Your family of five would like to eat at Chipotle. The total bill is $50. If the bill is paid using a debit card, $50 will be deducted from your checking account. How much would the "actual" amount be if you used the United Explorer MileagePlus card?

First, you would have access to the UnitedPlus X app. Make sure you download it onto your phone.

From there you could purchase an eGift Card from Chipotle for $50 using your United℠ Explorer Card. You would earn 100 miles by using the card, 25 miles by purchasing the eGift Card, and an additional 25% bonus in miles by registering the card to the UnitedPlus X app—or 13 miles. The total miles earned from this one transaction—138.

Next, you would activate the Chase offer exclusive to United℠ Explorer Card cardmembers. The current offer is a 10% statement credit.

Chase statement credit offers
Screenshot courtesy of Chase

Finally, make sure you have a rewards account with Chipotle. Yes, your reward stacking is not yet done! You will earn 50 Chipotle Rewards from this transaction.

Finally, you would complete your purchase by using your $50 eGift Card—or less if you have a promo code—after logging in to your Chipotle account.

What would be the "actual" amount paid using your United℠ Explorer Card? If we assign a value of 1.2 cents per point to the United MileagePlus loyalty program, the "actual" amount would be $43.35, or a savings of $6.65, and less than using the debit card to pay the $50. This may not sound like a triumphant victory, but it yields a multiplier rate of 13.3X! The credit card rewards gurus understand that it is all about the bigger picture—continuing to find ways to increase the multiplier rate over the course of the year! When this type of behavior is repeated over and over again for an entire year, the actual value can easily climb into thousands of dollars! You can apply for this card here! Learn more about this topic in the following post: Credit Card Miles & Points—The Secret You Didn't Know About!

"Using the right credit cards versus a debit card can lead to savings in the thousands of dollars over the course of a year."

When Using a Credit Card Is a Bad Idea

Although the above-referenced example illustrates the potential value of using a credit card over a debit card, it is not a good idea for everyone. Using credit cards has crippled some individuals financially for many years. High-interest rates, the ease to rack up credit card debt, and unexpected loss of income has put many individuals on a path they wish they never knew existed. This has led to bad credit scores, rejected loan applications, and even bankruptcy filings.

There is also the emotional impact having a negative experience with a credit card can bring. This includes stress, anxiety, and damaged self-worth.

Thus, it is critical that an individual considering using a credit card use it responsibly. There are essentially two aspects to responsible credit card use:

  1. Pay the outstanding balance in full on or before the due date; and

  2. Don't use your credit card to buy an item you normally wouldn't purchase with cash on hand.

By adhering to these two points, an individual will avoid paying interest and maintain healthy spending habits. The opposite of this method—paying out interest and spending money impulsively—will eat away at the credit card rewards and other benefits derived from the credit card. This would be defeating the purpose of using your credit card to save money versus using a debit card.

The Best Credit Cards

If you are in control of your finances and are looking for the "best" beginner's Award Travel credit card out there, then select the Chase Sapphire Preferred® Card! It has a 60,000 Ultimate Rewards® points welcome bonus, enhanced benefits, and it opens the door to Chase's 14 transfer partners. Taking advantage of transfer partners is one way to get even more value from your points! You can apply for this card here! You can also learn more about this card in the following post: Chase Sapphire Preferred—The Best Credit Card Just Got Better!

Perhaps the best airline credit card is the United Quest℠ Card. It currently packs a 80,000 miles welcome bonus! You can apply for this card here! You can also learn more about this card in the following post: United Quest Card—The Best Airline Credit Card!

One of the best no-annual-fee credit cards that earn rewards is the Chase Freedom Flex℠. Not only does it currently have a 20,000 Ultimate Rewards® points welcome bonus, but new cardmembers can earn 5X points on grocery store purchases on up to $12,000 spent in the first year! You can apply for this card here! Learn more about this card in the following post: Chase Freedom Flex—A Remarkable No Annual Fee Card!

Are you unsure of what credit card to select? Feel free to take advantage of our FREE Credit Card Selector Calculator. It uses our proprietary algorithm which determines the best credit card in our database based on your spending habits.

The Bottom Line

Entering the arena of credit card rewards, reward stacking, and other topics related to credit card use can be confusing—even overwhelming. My recommendation is to start slow; view this process as a marathon and not a sprint. Learn the basics. Don't try to do anything unethical. Seek out advice from those who have been successful at earning and redeeming their miles & points earned through credit card use.

Of course, you can always seek out a Credit Card Miles & Points Consultant. They will take the time to walk you through the various steps. The knowledge and experience you gain working with a Credit Card Miles & Points Consultant will put you on a path where you will be happy that you made the switch from using a debit card to a credit card.


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