Why Money Expert Tori Dunlap ‘Will Never Use a Debit Card Again’
Looking for some money advice? Just hop onto YouTube and click on any video from Tori Dunlap, the author of “Financial Feminist.”
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In one of her most recent videos titled “I Will NEVER Use a Debit Card Again, Here’s Why,” Dunlap outlines why credit cards might be more financially beneficial to use than a bank or debit card.
As Dunlap noted in the video’s description, “Credit cards have gotten a bad rap due to their easy misuse and the lack of knowledge about credit card best practices. We’re constantly bombarded with opposing views of whether credit cards are good or bad. But what’s true?”
Here are some of the takeaways from Dunlap’s video to help you decide whether it’s time to switch the cards in your wallet from debit to credit.
We’ve Been Told Credit Cards Are Bad
Dunlap broke down some of the myths and falsehoods around credit card usage, using an analogy comparing credit cards to a knife.
“…used incorrectly, it’s not a great time,” Dunlap explained. “Use correctly, great time. Like a knife. If you mishandle a knife, it can cut you. But knives are also a necessary part to your life.”
The money goal outlined by Dunlap is to “build a smart relationship with your credit card to help you build wealth.”
Credit Cards Are Cool
In Dunlap’s professional opinion, credit cards are very cool. That’s because credit cards build up your credit while debit cards do not. If that sounds like an obvious observation, Dunlap explained further.
Using a credit card increases your credit score, which, according to Dunlap, “helps you do anything else in life,” including buying a house, renting an apartment, and in some cases, even your utilities.
“What’s happening is that you are putting purchases on your credit card and then — very key — you are paying your bills on time and in full,” Dunlap said.
She outlined that the best way to use a credit card is to not keep a balance on your tab, lest interest and late fees pile up.
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Fraud Protection
During her video, Dunlap used the example of someone getting ahold of your debit card and draining your bank account. Can you get the money back? Maybe… or maybe not. That’s not the case with a credit card.
“If someone gets my credit card online or steals my credit card, I can dispute any charge they put on it and I’m not liable for those purchases. Guaranteed!” shared Dunlap, citing the Fair Credit Billing Act (FCBA) and what the law covers in a graphic.
Free Money and Perks
“You don’t have to be putting millions of dollars on this card to make it beneficial for you,” Dunlap advised before breaking down the rewards that come with various credit cards.
Cashback cards are ones where “a percentage of the card purchases is returned to you” and, according to Dunlap, are great for “everyday purchases” for people with moderately good credit scores.
Dunlap also explained that some of her credit cards provide her with lounge access at airports, travel upgrades and perks, free TSA pre-check, increased rental car insurance and cell phone protection.
These should all be taken into consideration when deciding how to use your card to maximize the rewards.
What About Annual Fees?
Dunlap addressed one of the major concerns that come with credit cards: annual fees. These fees usually sneak up on users and add to the balance they’re already carrying.
“Annual fees are not a reason to not take advantage of a credit card,” Dunlap said, noting that fees are a part of the larger financial picture. “Fees of $95 are common on rewards cards; high-end cards with really good perks can have fees of upwards of $500.”
But when you’re utilizing the perks and rewards you’ve earned by using the card, it winds up basically paying for the fee itself. Consider how much you’re saving and see if it’s more than the annual fee.
Dunlap recommended comparing different card offers because one size does not fit all. You should find the card that best aligns with your financial situation.
Picking the Right Credit Card
If you are new to credit cards, Dunlap suggests starting with one card and working your way up.
“You don’t have to have five credit cards, nor should you,” Dunlap explained.
If you are having trouble picking one, she recommended starting with a cashback card and going from there.
Following Dunlap’s advice, using a credit card works when you’re budgeting and tracking your expenses regularly and avoiding a balance at the end of the month. But, if you have to overspend in order to get a sign-up bonus or reward points, it’s not worth the financial strain.
Her biggest warning? Not to open a credit card before a major life event, such as the purchase of a house or new vehicle.
“I would recommend opening a credit card six months before a significant purchase,” said Dunlap. If you can open a credit card more than six months ahead of a major buy, even better.
Opening up a credit card and using it responsibly is one of Dunlap’s “favorite rich people hacks” and in her opinion, a great way to build wealth.
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