Is a Debit Card a Good Choice?

March 3, 2009

Debit cards are a good choice if managing money and your credit is a problem for you. Debit cards are linked to your checking account. You can use them as credit cards if they contain a Visa or MasterCard logo on them. They don’t incur annual fees or interest charges like a credit card does because they use the money in your checking account to make payments. With that said, are debit cards as good a choice as they seem?

Debit cards teach you to manage money if you had trouble in the past with credit cards. They come complete with a safety net because they are tied to a checking account with a set amount of funds. Checks and cash are being pushed out of the way in favor of the “new plastic”.

However there are some pitfalls that do exist. Since debit cards are tied to a checking account, you need to keep track of your checking account balance. Just as quickly as that money was deposited in your account it can disappear if you are not careful. The checking account can become overdrawn without ever bouncing a check. Remember ATM withdrawals and buying something with a debit card all reduce your checking account balance.

Debit cards are also subject to “blocking” just like a credit card. This means that some merchants can block off a set amount of money in the account until your transaction with them is processed. Case in point: using a debit card to pay for a $20 visit to the gas station, but the store blocks off $50 on the card. If the extra $30 was earmarked for something else, you will run into problems until that block is removed.

Debit cards are a good choice for you if you have experienced credit card problems in the past. They are very convenient but remember to use them wisely or you could run into trouble with your checking account balance.

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