Most people are very used to using a debit card these days and many even use it on a daily basis. Debit cards do have their critics though and not all financial experts think that over-reliance on a debit card over other methods of payment is always a good idea. Indeed like many things debit cards have their advantages and their disadvantages. Here are some of the most important explained:
Debit Card Use Advantages
There is certainly quite a lot to be said for the convenience of using a debit card as well as some distinct benefits:
- Safer than Cash – Carrying around large amounts of cash is never a good idea, but then again heading for a night out or to go shopping with just £20 in your wallet is simply not going to cut it most of time. As ATM machines can be found almost anywhere these days then a debit card allows you to only get out cash if you really need to while you use it to pay for many other purchases instead.
- Online Shopping and Bill Pay – Because a debit card can be used in the same way as a credit card it means that cardholders can take advantage of all the great online shopping opportunities that are out there as well as make regular bill payments online in many cases – saving you the hassle of paper checks, stamps and trips to the Post Office.
- Easier to Keep Track of Spending – Many people have done this at least once – written a paper check and then forgot to record the transaction in their check register. The end result is often very expensive (and often embarrassing) in terms of bounced check fees and overdraft charges. Debit card transactions are posted right away online – even credit transactions that do not “clear” immediately – so it is much easier to keep a daily eye on what you are spending and how much money you have left!
- Great for Those Without a Credit Card – If you have poor credit – or no credit at all – getting a credit card can be hard and that can potentially prevent you from doing all kinds of things like renting a car or booking travel arrangements. Since a debit card can be used in lieu of a credit card in most situations these days they can really help people who are still trying to build their credit out.
- Teaching Tools – Those under the age of eighteen cannot apply for a credit card of any kind and even when they do reach their 18th birthday the rules governing credit cards are much tighter than they once were and getting a student credit card is much harder than it once was. There are a growing number of prepaid credit cards that are specifically designed for teens though and using one can be a great way to learn all important money management skills – as well as being “cooler” than having to pay in cash.
- Less Loss Potential – If a £20 note falls out of your pocket chances are it is gone forever. If you lose a debit card however once you report the loss to the bank within 48 hours the most the law says you can be held responsible for is £50 and in fact many debit cards are covered by either VISA or Mastercard’s zero liability policy.
Debit Card Disadvantages
The downsides associated with debit card use mainly revolve around the fees charged but there are one or two other disadvantages as well:
- More Fees: There are potentially quite a few fees involved in regular debit card use that can add up quite quickly. The largest of these fees tends to be the charges you incur when you use an ATM to withdraw cash – if you use an ATM that does not belong to your card issuer’s network then you may be charged two fees – one by your own bank and one by the ATM owner and these days these fees when combined can be as high as $5 per withdrawal. Monthly fees and PIN transaction fees can add up as well. Many of these fees can be avoided though if you shop around carefully as some debit cards offer a much better value in terms of fees than others.
- Dealing with Problem Transactions – Sometimes people are faced with a dilemma when making larger purchases or purchases online – which should they use, their credit card or their debit card? In one respect paying with a debit card may be a better idea as the item is paid in full. On the other hand though if there is a problem with a transaction or you need to return an item getting your money back on a debit card can be a lengthy and confusing process, whereas if you had opted to use a credit card the transaction would simply be reversed and you would not be “out” the money.
- Recurring Transactions – As people spend more and more time on the Internet they tend to sign up for all kinds of services that have a monthly charge attached to them – everything from a TV service like Netflix to music services like Spotify and 101 things in between. Most of these services accept a debit card as readily as they accept a debit card. The danger is though that you will forget that one of these payments is due and the charge will be made when you do not quite have enough money in your bank account to cover it and you will be tied up with overdraft fees and cancelled subscriptions, something that would probably not be an issue with a credit card.
In the end how and when they use a debit card is up to the individual. With some careful shopping around you can find debit cards that have lower fees attached to them and there are ways you can minimize the fees you are charged – asking for cash back when making a debit card purchase instead of withdrawing money from an ATM for example. Life without a debit card can be rough these days so using them occasionally is almost a must, and can be quite beneficial if you use it sensibly.