Using debit cards instead of credit cards is one of the wisest financial moves you can make as it limits you to spending money which you already have, instead of giving you a licence to use money you may not have. Linked directly to your current account, using your debit card is exactly the same as using cash without the worry of carrying cash around with you. They offer all the convenience of credit cards without the need to repay the funds used.
However there are times when it does not make good sense to use a debit card, and this is when you are making a larger purchase from which you would benefit by having the built in insurance protection of a credit card. If you book a holiday through a tour operator which subsequently goes bust then the money you have spent is not lost if you have used a credit card. This is a frequent occurrence as the latest operator to go under, Goldtrail holidays UK, demonstrates. Credit cards provide the best protection in such circumstances as the credit card companies step in to return your funds.
Any item which you purchase which would benefit from the extra three months guarantee which a credit card often offers should not be purchased by debit card as the additional guarantee would be automatically lost. Credit cards which offer free built in protection against theft or accidental damage for typically ninety days should be used in preference to debit cards.
For everyday spending a debit card is excellent as the consumer knows the level of funds in their bank account and thus how much they can spend, just as they know how much cash is in their wallet. However those who are not responsible and do not keep records of debit card spending can just as likely go overdrawn on a debit card and face charges, as they would similarly overspend on a credit card and face interest charges. Debit card use is not recommended for those who cannot track their spending and they are better advised to stick to cash.
Small items should be purchased with cash to avoid having to note multiple transactions for small amounts: simply noting how much one withdraws from the ATM by debit card reduces the paperwork trail therein. Ideal use of a debit card is to put weekly expenses such as grocery shopping on a debit card and simply take a fee free cash withdrawal at the same time from the retailer.
Those who have excellent credit are far better served by putting all everyday spending onto a cash back credit card thus effectively receiving an automatic discount of up to 3% on every purchase. Reward credit cards which offer something back are also more advantageous to the consumer than debit cards, providing the balance is paid off in full each month.
Using debit cards in general is the best choice for many people if they do not qualify for a cash back credit card. Those who frequently end up paying interest on credit cards should make the transition to debit cards but be prepared to keep records of spending. Many countries are far more used to dealing with debit card transactions than credit cards and the level of personal debt is lower thus demonstrating that overall they do control unnecessary spending to a much greater degree than the use of credit.