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When to Use Your Debit Instead of Your Credit Card

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Optimize your debit card use in 2012

Many of us pay for purchases with either a debit card or a credit card. Credit cards are an excellent form of payment in some situations, but there are certain times when and reasons why choosing to pay with a debit card could be a better choice. So the next time you reach for your wallet, carefully consider your options and consequences before you pick your plastic. says, "The best way to differentiate credit from debit is this: credit is borrowed, debit is owned. When you pay with credit you are borrowing a financial institution's money often with the promise that you will pay them back (with interest); debit purchases are made with money you already have." and suggest when debit cards could be the right choice:

Free ATM withdrawals

Need cash in a hurry? Use your debit card at any one of our branches and withdraw cash from the ATM without paying a fee. If you use a credit card at the ATM, you might get hit with a high cash-advance fee.

Keep debt away

If you're trying to manage your credit card debt, then reaching for your debit card when you shop is the wise option. Because debit cards draw money directly from your bank account, you'll have peace of mind knowing that you won't receive another bill for your purchase. Until you pay down credit card debt, using your debit card offers a more responsible payment method.

Spend less with debit cards

A study of credit card use at McDonald's restaurants found that people spent 47 percent more when using a credit card instead of cash. But with a debit card, you'll have to consider your account balance before making your next purchase. For example, when using a debit card, you may resist the urge to buy that expensive smartphone and instead opt for a more prudent cell phone or delay buying altogether until you're in a better financial position.

Save money

One great feature of debit cards is that you can say goodbye to interest payments. There is no interest charged on your purchases. That alone can save you a bundle each year, especially if you tend to carry high credit card balances. If you need to sock away money for an emergency fund, your child's college education, a new home or anything else, consider the debit card a "saving" grace.

Retail incentives says, "Shoppers should expect to see retailers try a number of methods in the coming months to entice them to whip out debit cards instead of credit cards at the cash register... At IKEA, for instance, the home furniture store is offering a 1 percent discount on future purchases if customers use their debit cards at checkout."

Of course, there are times when credit cards are useful, such as purchasing big-ticket items or building your credit history. But choosing your debit card for many of your other purchases this year could help manage your finances and keep debt at bay.

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