Debit cards popular but not without drawbacks
Reaching for your debit card when you’re out shopping seems like a smart move: It works like cash and there’s no fat credit-card bill waiting in your mailbox at month’s end. So it’s no surprise that debit cards are as popular as credit cards.
But debit cards may leave you owing more than you bargained for and getting less in return than you think.
• PIN money. Banks often tack on charges ranging from a dime to $1.50 when you select “debit” at the register and enter a PIN. (The average is 75 cents.) Find a debit card that doesn’t impose PIN fees or press the “credit” button and sign for purchases.
• Overdraft fees. Many banks will let you spend more money than you have in your account, then hit you with overdraft fees of around $30.
• Credit-record troubles. Spending lots with a debit card won’t beef up your credit report; it will only drain your account. To build a credit record, use credit cards regularly. Just try to do so without amassing a balance from month to month.
• No easy chargebacks. Unlike a credit card, debit cards yank the money from your account when you make a transaction. If items you order arrive damaged - or don’t arrive at all - you can’t withhold payment.
To make sure you aren’t left holding an empty bag, use debit cards for small purchases - like groceries - and credit cards for big or online purchases.
What’s the bottom line? Debit cards can be great for budgeting, especially if you often carry a balance on your credit card and want to avoid adding to your debt load.
But if you carry no balances and you always pay on time, stick with your credit card. It will keep you out of jams.