Navigating Debit and Credit Cards: Insights from Mark Cuban and Renowned Finance Experts
Credit and debit cards are convenient for making purchases without using cash. In the U.S., 93% of adults have either a debit or credit card. But which is better for daily transactions? Is one safer or more beneficial than the other? Even financial experts have differing opinions. Here’s what billionaire Mark Cuban and two other financial experts think, to help you decide which is best for you.
**Mark Cuban: Avoid Credit Cards**
Mark Cuban, known for owning the Dallas Mavericks and being a wealthy panelist on “Shark Tank,” advises against using credit cards. He points out that the high interest rates on credit card balances make them not worth it. As of November 2023, the average credit card interest rate was over 21%, according to the Federal Reserve. At such rates, a balance can double in less than four years, which can severely impact your finances.
Cuban acknowledges that paying off your balance in full each month can avoid these high rates, but not everyone has the financial discipline or cash flow to do so. He warns that a single financial setback, like losing a job or facing emergency expenses, can lead to a debt that grows rapidly and becomes a long-term burden.
Instead, Cuban recommends using debit cards, provided they don’t charge fees. He also suggests taking out a personal loan if you need money, as it typically has a lower interest rate and a set repayment period, helping you avoid the pitfalls of credit card debt. Additionally, making timely payments on a personal loan can help build your credit score.
**Tori Dunlap: Credit Cards Only**
Tori Dunlap, the founder of “Her First $100K,” a business aimed at helping women improve their finances, and a successful financial podcaster and author, prefers using credit cards exclusively. She understands the risks of credit cards but argues that if you’re financially responsible and pay off your balance each month, credit cards offer significant benefits.
Dunlap highlights three main advantages of credit cards:
1. Rewards programs.
2. Credit score improvement.
3. Protection against unauthorized purchases.
She advises against accumulating debt just to earn rewards points. However, if you use your credit card for regular purchases like gas or groceries, you can benefit from rewards such as hotel stays, airline miles, or cash back.
Using a credit card responsibly by not carrying a balance and making timely payments can also improve your credit score over time. In contrast, using a debit card does not affect your credit score.
Lastly, federal law limits your liability for unauthorized credit card charges to $50, and most card issuers offer even greater protection, covering you for any fraudulent charges.