Debit Cards - A Smart Choice?

Debit cards are associated with checking accounts. Consumers can use them as credit cards if they contain a Visa or MasterCard logo on them. They don’t incur fees like a credit card does because they are backed by the amount of money in the account. With that said, are debit cards as good a choice as they seem?

A customer can choose whether or not they wish to receive a debit card at the time they open a checking account. There appearance is quite similar to that of credit cards and they are used in the same way, making purchases at restaurants and stores easy and quick. Plus, none of the charges associated with credit cards apply to debit cards. Bank commercials often glamorize the use of debit cards, as if using cash were the most terrible faux-pas in the financial world.

If an individual has had difficulties using credit cards responsibly, debit cards can help them learn to handle their finances better. Instead of carrying checks or cash, debit cards are heralded as the new plastic money. Since they can only draw from the funds already present in a checking account, they are considered to be safe too.

The above mentioned functions of debit cards make them seem easy to use and safe, which they can be. Be warned, however, that there are risks associated with the misuse of debit cards.

In order to balance your checking account, all purchases made with a debit card should be recorded. ATM’s, a modern marvel of convenience, can be a huge source of problems for a debit card user since they offer instant cash.

If you do not use your debit card responsibly, the money in your checking account could disappear without a trace. Because transactions processed with your debit card do not clear instantly, the amount that the ATM tells you that you have in your account could be off. This may result in you overdrawing from your checking account.

Like credit cards, debit cards can have funds blocked off by businesses you make purchases from. They freeze a certain amount of money until the transaction clears. For example, this means that buying $20 of gasoline at the gas station will actually freeze $50 in your checking account, causing problems if you try to spend the remaining $30.

If you are able to handle your money well and make responsible choices when it comes to spending, a debit card can be great tool. The misuse of these cards, however, can cause problems, including a checking account with a balance that dips down into the red.

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