When you open checking and savings accounts with a bank, you typically get a debit card, so that you can access your money in ATM machines or pay for purchases at stores and restaurants.  When you use your debit card, the amount spent is immediately deducted from your account.  Debit cards are usually treated like credit cards as far as merchant acceptance goes.  They are easier to use than writing a check or paying cash.  In my house, we use very little cash and pay for most purchases with our debit card.

The Differences Between Debit and Credit Cards

While debit cards can be used just about anywhere a credit card can be used, there are some differences.

• Debit cards deduct from your bank account immediately.  Credit cards are associated with a line of credit and you have a grace period in which to pay on the balance.
• Debit cards usually require a PIN to be entered to complete the transaction, although sometimes this is not necessary because your signature is used.  Credit cards use your signature or expiration date and CVV from the back of the card.
• Debit cards do not have rewards for usage.  Many credit cards offer cash back or bonuses for using them.
• Debit card fraud may not have the same level of protection as credit cards.  If unauthorized use of a card is found, you have zero liability with a credit card but that may not be the case with a debit card.
• Debit card usage does not help build your credit score.

When to Use Your Debit Card

First, in order to use your debit card, you must have an adequate balance in your bank account.  If you maintain a large balance in your account, you can use your debit card without thinking too much about whether you have sufficient funds.  With a credit card, you can spend more than you have in your accounts, which gets many people into financial trouble.

For everyday purchases like purchasing gasoline or groceries, I use my debit card.  I also use my debit card to withdraw or deposit cash and checks.  However, for bigger items, I am starting to use my credit cards.  I don’t like to use credit cards since I am always worried about overspending and going into debt.  I know I can’t overspend with a debit card, but with a credit card, you may end up carrying a balance which is not good.  You should always be able to pay off your credit card each month.

Some other cases where you should definitely use your credit card instead of your debit card:

• Online purchases.  Never use your debit card online since fraudulent use of your card may result in you being liable for the amount spent, depending on the terms dictated by your bank.
• Restaurants.  Often your card disappears with your waiter and you don’t know what they are doing with it.
• Big ticket purchases.  You might as well use a rewards card for these items.
• When the card disappears from your sight by the store clerk or merchant, use a credit card for that transaction.  If you are handling the card the entire time, you are usually safe with a debit card.