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Debit Cards vs. Credit Cards: What Mark Cuban and Other Famous Finance Pros Advise

Tony Rivetti / ABC
Tony Rivetti / ABC

Credit and debit cards are convenient ways for people to make purchases without having to fork over actual cash. Both are popular in mainstream American society, with 93% those 18 or older in the U.S. having either a debit card or a credit card.

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But is it better to use a credit card or a debit card for your daily transactions? Is one inherently safer or better than the other? Even financial experts tend to disagree. Here’s a look at what famed billionaire Mark Cuban and two other financial experts have to say on the topic so that you can decide which is the best choice for you.

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Mark Cuban: ‘Don’t Use Credit Cards’

Mark Cuban is well-known for his status as the owner of the Dallas Mavericks and his role as the richest panel member of the TV show “Shark Tank.” As a billionaire, Cuban can obviously use whatever type of payment method he wishes, so his insights can be particularly valuable. So, what does the outspoken Cuban say about credit cards? Not to use them at all.

For Cuban, the exorbitant interest rates that credit card companies charge on outstanding balances negates their worth. According to the Federal Reserve, the average credit card interest rate was over 21% as of November 2023. At those rates, an outstanding balance can double in less than four years, draining your cash flow, which could otherwise be used for everything from saving and investing to paying your monthly bills.

While Cuban acknowledges that you can avoid these high rates if you pay your balance in full every month, the truth is that not all Americans have the financial discipline — or even the cash flow — to do so. Thus, Cuban urges people to not even use credit cards in the first place. All it takes is one bad spell where you lose your job or have to pay emergency expenses, and suddenly, you’re left with a rapidly growing debt that could be around your neck for a lifetime.

For this reason, Cuban endorses debit cards over credit cards — but only if they don’t charge any fees. He also suggests that you take out a personal loan if you really need the money, rather than using a credit card. At least with a personal loan, you’ll have a lower interest rate and a finite maturity date, after which you’ll be free from the loan. You’ll also be able to build your credit by making successful payments over time.

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Tori Dunlap: ‘I Only Use Credit Cards’

Tori Dunlap is the owner and creator of “Her First $100K,” a multimillion-dollar business aimed at helping women improve their finances. She’s also the owner of a successful financial podcast and a New York Times bestselling author. In contrast with Mark Cuban, however, Tori Dunlap says that she only uses credit cards — never a debit card.

Dunlap’s reasons are simple. As a financial expert, she fully understands that using credit cards can be a “slippery slope,” and that, if you aren’t careful, they can lead to financial difficulty. But Dunlap argues that if you’re a financially responsible person that will pay off your balance every month, using a credit card can offer significant benefits. Specifically, Dunlap says she prefers credit cards for these three reasons:

  1. They offer rewards.

  2. They boost your credit score.

  3. They protect against unauthorized purchases.

Dunlap stresses that you shouldn’t rack up credit card debt just to get points. However, if you use your credit card to pay for things you are going to buy anyway, such as gasoline or groceries, why shouldn’t you take advantage of the “free” rewards, which you can then use for everything from hotel stays to airline miles to cash back?

Using your credit card properly — meaning not carrying a balance and making all your payments on time — will also boost your credit score over time. If you use your debit card instead, it won’t have any effect at all on your credit score.

Lastly, by federal law, no credit card company can hold you responsible for more than $50 of unauthorized charges. Most card issuers take that even one step further, protecting you from any fraudulent charges at all.

Frank Abagnale: ‘I Don’t Own a Debit Card… I’ve Never Allowed My Three Sons To Possess One’

The former fraudster, popularized by the movie “Catch Me If You Can,” says that credit cards “are the safest form of payment that exists on the face of the Earth.”

But Abagnale adds an additional twist to the “credit card/debit card” debate. As he puts it, he uses the bank’s money to pay for all of his purchases while his own money sits in a money market account and earns interest. In that way, he is the one benefitting from the float, not the bank. He can buy something and still enjoy earning interest on his money for an additional 30 days or more, until he has to pay it off.

Abagnale also supports Dunlap’s contention that a credit card will both build credit and keep him safe from fraud. As he puts it, someone can charge $1 million on his credit card, and his actual liability will be zero. If he buys something that’s broken or if the website is fictitious or fraudulent, it doesn’t matter — he still doesn’t owe anything. That’s not the case if he were to use a debit card or cash. Abagnale warns people that they are putting their own money at risk every time they use a debit card instead of the bank’s money.

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This article originally appeared on Debit Cards vs. Credit Cards: What Mark Cuban and Other Famous Finance Pros Advise