Why the real Frank Abagnale thinks you should never use debit cards

Why the real Frank Abagnale thinks you should never use debit cards

  • Frank Abagnale only ever uses credit cards, not debit cards.
  • Frank outlines how credit cards improve your credit score, cash flow and reduce your liability, especially for business owners.
  • Examples show that banks are faster to act on credit cards that are compromised

As a teenager Frank Abagnale was one of the most wanted men in America: a fraudster, con man, imposter and cheque forger – you name it, he’d probably done it. But these days Frank – the real-life man behind Catch Me If You Can – plies his trade as a veteran security consultant and fraud expert.

And he’s got a piece of advice for you: ditch your debit cards.

So why does one of the foremost experts on financial security spend his time travelling the world to share his insights on credit cards, debit cards and all things fraud related? To make good on all of the fraud committed earlier in his life and help save regular people and business owners just like you from security threats and liability issues.

Keep your cash flow rolling without risk

Card being used at a card POS terminal

If there’s anyone who knows a thing or two about keeping the cash flowing in, it’s Frank Abagnale. During his years on the run from the law, he made millions of dollars by cashing bad cheques.

Nowadays he’s on the straight and narrow, and he certainly doesn’t recommend that anyone should follow in his footsteps. 

He says that one way that business owners can enjoy less interruption to their cash flow is by using credit cards or charge cards.

Instead of forking out your own money to pay suppliers and staff with your debit card, with a credit card you’re instead using the bank’s money, which you pay back at a later time. This offers a range of benefits, but perhaps the most critical are:

  • Zero interruptions to cash flow: As most business owners know – whether you run a startup or an established company – money can sometimes get tight, especially during seasonal lows. That often means shifting funds around in order to make payments. With a business credit card, those payments can be made straight away, allowing you to get back to what’s most important without worrying how much is left in your debit account.
  • No risk of losing your own money: If money is fraudulently removed from your credit card, it falls to the bank to get it back. That means you’re not on the hook – as you could very well be if someone stole money from your debit card. So you can simply alert your bank then get on with business.

Do away with liability

Man and woman at an airport

It’s this lack of liability that is a huge advantage for business owners. Frank says whenever you use your debit card, you’re immediately putting yourself – in particular, your own money – at risk. You’re exposing your money in your account and could find yourself in dire straits should your account be compromised and the funds withdrawn without your knowledge or consent.

On the other hand, if you use only credit cards for your transactions, you aren’t liable should the card be compromised. The funds, after all, belong to the bank. And since it’s not your money that’s being stolen, the bank will likely expedite any processes to rectify the situation as soon as possible.

Take the recent example of Aussie traveller Kate Browne. She was jetsetting around Africa with her family when she realised her debit card had been skimmed – $12,000 stolen at the very start of their 10-week adventure.

Although the bank managed to get the money back before their holiday was over, Kate says she believes things would have moved a lot faster had her credit card been skimmed instead: “When it’s the bank’s money it’s in their best interest to get it back ASAP, and when it’s a debit card the sense of urgency from the bank is a lot lower,” she said.

Even if you use your debit card every day for the next 25 years, it won’t raise your credit score one point.
- Frank Abagnale

Savvy business owners should be looking to reduce their liability at every opportunity. But even more critical, according to Frank, is how there’s really no incentive to use a debit card for business purchases: “Even if you use your debit card every day for the next 25 years, it won’t raise your credit score one point.”

Boost your company's credit score

Miles -  Credit Score

Did you know that your company has a credit score? Well, it does. And the usefulness of a credit card is the same for an individual as it is for a business owner.

Anyone who wants to boost their personal credit score can get a credit card, make purchases and pay off the debt within the appropriate time (hopefully without incurring any interest). That process boosts their credit score and makes them more attractive to banks, as they are seen as being competent with purchases and repayments. If that same person only uses a debit card – i.e. only spends with their own money in their savings account – they can’t prove they will be responsible when using (and repaying) funds that aren’t their own, such as with a home loan or personal loan.

In much the same way, business owners must be able to prove they are capable of managing and repaying loans – and the easiest way to do that is by replacing your business debit card with a business credit card. The transition can be quick and easy, and as long as you stay on top of your purchase history and make repayments before interest starts accruing, you’ll be in the best possible position to boost your company credit score.

This is crucial for business owners who either want to expand their company – and need a cash injection to do so – or are looking for a business loan to tide them over during the leaner months so they can get back into the black faster.

Hassle-free online purchases

Woman looking at laptop for online purchases

While the internet wasn’t around when Frank was doing the majority of his ‘dirty work’, he understands how enmeshed the digital world is with online payments. This is especially true thanks to the rise of e-commerce.

Most businesses these days make purchases online, even if they themselves are traditional brick-and-mortar set-ups. The competitive nature of online business, and the speed with which deliveries can be made, makes purchasing over the internet far easier than making multiple phone calls or mailing order forms to suppliers.

While it’s true you can use your debit card for most online purchases these days, it adds another layer of risk. Dodgy deals and unsecured websites can see your details skimmed as soon as you press the ‘Buy Now’ button. And unlike having your physical debit card stolen – where you might have time to call your bank and cancel the card before the thief accesses your funds – when it’s stolen in the digital world it’s under immediate threat. And it’s up to you to act fast.

With a business credit card, again your liability for unauthorised spending is zero provided that you used reasonable care in protecting your card from loss or theft; and you promptly report loss or theft to your financial institution. 

Since it’s the bank’s money that is vulnerable it’s they who will fight tooth and nail to eliminate the threat. For credit cards, it's only your credit limit that takes a hit and the bank will credit your account in full whilst they go about investigating the "unauthorised transactions".

If your debit card is stolen, that money could be gone instantly and you won't get that money back into your account for weeks or months after all investigative steps have been taken.

Think about how that would impact your business in the immediate term (cash flow woes), as well as in the weeks and months down the track if you are unable to recover your much needed savings.

Some of the biggest benefits from business credit cards

Businessman travelling

Most business owners use a credit card that meets their particular needs, whether it’s complimentary travel insurance, frequent flyer points, or 0% balance transfers. Here are a few options depending on what it is you’re looking for:

Frank's final words

Frank Abengale With Paper Shredder

In an interview with the AARP Bulletin, Frank shared some great nuggets of wisdom that can help you in your everyday business dealings. Most importantly, he stressed the reasons behind why credit cards are so much better than debit cards. Here’s just some of what he had to say:

  • “I only use credit cards because if somebody gets my card number and charges $1 million, my liability – by [US] federal law – is zero.”
  • “Debit and credit cards are treated differently by consumer protection laws.” That means you’ll be liable when it comes to fraudulent charges on your debit card.
  • “I use a service that monitors all three credit bureaus and notifies me in real time if somebody is trying to use my credit.”