- When you apply for a debit card, you don't have to worry about the interest rate on the card, because unlike credit cards, it doesn't have one. Debit cards also don't charge you a yearly fee to use them. When you need cash, you can easily use your debit card to get the amount you need without incurring additional charges for cash advances. Over the long term, if you spend $5,000 each year using your debit card, you've spent $5,000. Use a credit card with a high interest rate, and unless you pay off the balance each month, you will have spent considerably more.
- A debit card can keep wild spending sprees in check. Once you are out of money, game over -- go home. A debit card will never cause you to incur debt since you are spending money that you have already earned. Conversely, when you use a credit card for purchases, debt can add up quickly. Five years from now, you probably won't feel very excited about paying for that espresso machine you simply had to have. Using a debit card encourages you to save before you spend. Keep in mind that although you're not racking up creditors, you're also not building your credit when you use a debit card.
- Despite their high interest rates and fees, credit cards have advantages that debit cards don't. Many credit cards provide buyer's protection and theft protection, and provide insurance to cover rental cars, perks that are not typically offered when you use a debit card from your bank. Some credit cards even offer cash-back bonuses, incentive gifts and frequent flier miles. If you're responsible with your money and able to pay off your balance every month, a credit card might be better for you than a debit card if you travel often or use other special offers. Credit cards can also come in handy in a financial emergency, as you are able to get a cash advance on your credit, another thing that isn't possible with a debit card. Of course, the best preparation for financial emergencies is to have savings.
- Credit cards are known for having high fees if you go over your credit limit. What they don't have, however, is a fee that occurs over and over again -- even on the same day. Go over your balance using your debit card and you can be subject to your bank's overdraft fees, which may be as high as $35 each time you use your card. Imagine going out with friends and using your debit card to purchase gas and movie tickets, and a soda at the corner store on the way home. If you left home with too little money in your bank account, you could be subject to four separate fees for your purchases. If you tend to keep a low bank balance, a debit card is not for you.
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