Obligation Reduction

An alternative to carrying cash is carrying a little piece of plastic the size of a credit card called a debit card. Unlike credit, a debit card acts as a check or cash as it automatically and immediately removes money from your linked checking account. Debit cards have another purpose, acting as an ATM or Automatic Teller Machine card so there is some usefulness to having one in your wallet. Read on and we'll take a look at the good, the bad, and the ugly of having a debit card.

Debit cards have gained strength over the past decade as consumers have realized its usefulness. Whether used at a store in place of money or at the bank to withdraw funds, a debit card is convenient, safe, and reliable.

The Good: If you hate to carry a lot of cash, then a debit card is for you. You may have trouble using the card overseas, but within the country you should be able to use your debit card wherever credit cards are accepted. Why carry around a wad of cash when this little piece of plastic can do the job for you?

The Bad: One disadvantage with a debit card is that if you forget to track your expenditures in your checkbook you could easily overdraw your account. Most new debit card users have this problem, but we all forget to track things from time to time, right?

The Ugly: If you use your debit card to make purchases you don't have the same protection as using a credit card. When using a credit card, if there is a problem with the purchase, you can appeal to the credit card company. Not so with a debit card. As it is treated like cash, your rights are limited. So, if you plan on making an important purchase consider putting that on your credit card and paying it off later when the bill arrives.

With a credit card you can accumulate rewards but with most debit cards there are no rewards offered. Although the debit card may say "Visa" or "MasterCard" on it, these two credit card networks only process the transaction. Likely, your local bank is also mentioned on the debit card as the funds you use will come out of your checking account.

Remember: use a debit card for the convenience but a credit card for product protection in the event of a large purchase.