There are some major don’ts when it comes to credit cards and debit cards.   Fortunately, we have the Consumerist to give us examples of what happens when you run afoul of these rules.

Don’t Get Yourself In A Position Where  You Are Paying Just The Minimum Balance

I have previously compared this practice to sharecropping and indentured servitude.    Once you enter into this type of arrangement, it is very hard to get out.     One of the many, many drawbacks of paying the minimum balance on your credit card, is that they bank can raise the minimum whenever it feels like it.    Apparently,  a lot of banks feel like doing that these days.   Here is the story of someone who got their minimum payment raised dramatically.   Like so many other stories that I have read, the pattern is clear.      The person was paying their balance off, was not paying late, and then seemingly out of the blue, their minimum payment skyrockets.

It appears that the bank is trying to force the person to default, so that they can raise their interest rates.    Actually, they want him to default on his debt to someone else.    People who are paying just the minimum are just barely scraping by.    Like two people being chased by a tiger, neither has to outrun the tiger, they just have to outrun the other person.   In the same way, a bank figures that if they can squeeze as much money out of someone first, then they will be more likely to default on someone else’s debt.   The whole thing stinks, but that is the reality that awaits you when you rack up so much debt that you can only pay the minimum.

Look At The Bright Side

In a perfect world, the minimum payment would be something high enough that you wouldn’t be trapped in debt forever.   The banks would essentially force you to act responsibly.   In the long term, the person will be better off paying a larger minimum every month, however, the likelihood is that that person would not agree.

More Problems With Debit Cards

I promise I have no inherent bias against debit cards.     On the face of it, they can be a more responsible choice, since there is no way to go into debt using them.     People who use debit cards have no choice but to have the money to pay for their purchases on hand, whereas people who use credit cards should, in my opinion, always have the money on hand to pay for their purchases.

The problem I have with debit cards, is that they have no protection.   I recently said it is insecure as giving someone cash, in that there is not much recourse if your goods or services are never delivered.    This case shows that it is actually worse than giving someone cash.    Actually, it is kind of like entrusting your bank account to everyone you make a purchase with.   In this instance, a cab driver decides to keep running the card at will for random amounts of money.    A run around then ensues when the victim tries to sort this out with their bank and the cab company.    With a credit card, this would result in a chargeback, with the burden of proof being placed on the merchant to prove the charge was authorized.     With a debit card, the victim is now asked to find a non-existent receipt and prove they were defrauded.     Really, the victim should report her card stolen and possibly close the account.    Any  other actions are going to be long and difficult.    At this point, it is unclear if the victim will ever get her money back.

The Consumerist concludes that people should keep cash in their pockets in case they ever need a cab.   I say, keep a credit card and an ATM card.      Charge the ride, or withdraw cash, and you will never be in a situation where your debit card is treated like a license to steal.