credit vs debit

Many debates have focused on whether it is better to use credit cards or debit cards. Renowned former criminal turned security consultant, ​Frank Abagnale Jr., the subject of the movie Catch Me If You Can, spoke at Google in 2017 and addressed this issue. A transcript of his remarks during that talk follow. 

"Now, one other tip I'll give you is: I don't own a debit card. I've never owned one. I've never allowed my three sons to possess one. Certainly and truly the worst financial tool ever given to the American consumer.

"So a long time ago, I asked myself a simple question. How would I remove 99.9% of my personal liability [snaps fingers] like that? Because I really don't want to worry about all these things. So I use the safest form of payment that exists on the face of the earth. And that is a credit card. Credit card-- Visa, MasterCard, American Express, Discover card. Not debit-credit, but credit card.

"Every day of my life, I spend their money. I don't spend my money. My money sits in a money market account. It earns interest. Actually, nobody knows where it is because it's not exposed to anybody to find it. It's just sitting there. I go to the dry cleaner, I give them my card. I pick up the groceries, I give them my card. I put fuel in my boat on the weekend, I use my card. I pay the marina to keep my boat in the water all year long, they put the rent on my credit card.

"I travel all over the world. While I wait to get reimbursed, I use my credit card. If I need euros, I go to the ATM machine, I use my credit card. I'm not going to use my debit card to get euros overseas or pounds in Great Britain. And every day, I use my card. And then if I pay the bill in full or part of the bill, my credit score goes up. So I'm building credit while I'm using that credit card.

"And if tomorrow-- and I'll do everything to protect my information-- but if tomorrow someone gets my card number and charges $1 million on my credit card, by federal law, my liability is zero. I have no liability. So yes, I love to shop online. I don't use a special card. I just use my credit card. If they don't deliver the merchandise, if they deliver it and it's broken, if the host site I went to was fictitious to begin with, I have zero liability.

"When you use your debit card, every time you reach for it, you're exposing the money in your account. The only person who's going to get robbed is you. When you use your debit card, you could use it for the next 50 years 20 times a day, you will not raise your credit score [shows index finger and thumb almost touching] by that much. And of course, when you use your debit card, you are liable up to a certain amount. And it takes a while in order to get that debit card fixed.

"So when we do post investigations at breaches [investigating what happened after a breach of financial security], and we say to someone,
     "On your incident, what happened?"
​     "Well, I was in Target, but I used a Visa card. So, I don't know, nothing. They canceled my card the next day. Two days later, FedEx sent me a new card. And that was the last I heard about it."
     "What about you?"
     "I used a debit card there. They took $3,000 out of my checking account. It took me two months to get my money back while they said they were investigating. I had to pay my rent, had kids' tuition, everything. I couldn't pay it because they had my money."
So I do it [use credit cards] for that.

"So I had three sons that went off to college, and I said to them, I'm not giving you a debit card. I've actually applied for a credit card in your name. So it's your card. Of course, you're 18. You have no credit. So I guarantee the card. So as a guarantee-er of the card, three things take place. One, the bill comes to me, and I'm responsible for the bill. So if you spend a lot of time in the bar, I'm going to know that. Two, I set the limit on the card. So whatever I want you to spend each month while you're at school, I'll set that limit. Third, every month that I pay the bill goes on your credit. So by the time you get out of college, you should be looking at a credit score of about 800. You want to buy a car, buy a house, buy a condo? You're not going to need me to do that.

"All three of my sons came out of college with scores up around 800. One of the best things you can do for your kids is to teach them to learn to use credit early on and build credit in their name. Credit is a very important thing. 30 years ago, it only meant whether you got the car, you got the house. Today, everything is based on your credit. If a company hires you, they're going to check your credit. If you buy auto insurance, they're going to check your credit. If you buy life insurance, they're going to check your credit. Everything is based on your credit. So you want to make sure that you maintain good credit. It's one of the best things you can do with your kids."