Using plastic to pay for your purchases can be easy and convenient, but be careful about using a debit card. More and more bank accounts offer debit cards automatically, and using them can be a very tempting alternative to cash and credit cards. However, debit cards also carry along some disadvantages, some of which can cost you money if you are not careful.
Increased Incidental Spending
With a debit card, you have the benefit of not running up a balance on your credit card (and accumulating interest) and the convenience of not having to carry around cash. Stopping at the coffee shop seems like less of an issue when you only need to swipe your debit card to pay for the $4 coffee. However, these charges can add up and cause problems when it comes time to pay important bills and expenses that require cash. Using cash can give you a visual reminder of how much you are spending and using a credit card will ensure you have enough cash left in your account
What Record Keeping?
As more people use debit cards to spend money from their checking accounts and get away from writing checks, they rarely (if ever) use the checkbook register or other record keeping to know how much money they have in the account. It can be easy to forget about outstanding checks and over-spend money from your checking account. Cash and credit cards do not have this problem.
Unlike credit cards, which play by a different set of rules, and cash, which is free to use, debit cards can carry inconvenient fees for certain types of transactions. It is also easier to incur overdraft fees on a checking account, and unlike credit card fees, these fees come out of your cash resources, leaving you in trouble when it comes time to pay the bills.
Credit card companies have excellent systems in place to protect consumers from fraud and disputed charges. Some credit card agreements even have a provision protecting travel purchases. Cash has the ultimate fraud protection as it leaves no access to your funds. Debit cards, however, have fewer and weaker protection policies. The liability for fraudulent charges is usually greater with a debit card, and mistakes can wipe out your bank account.
Not Everyone Takes Debit
Some smaller businesses, such as a snow cone stand or local restaurant, might not take plastic at all, making cash the better option. If you have fallen into the habit of using only a debit card you might find yourself unable to make some purchases. Also, some businesses, such as hotels or car rental companies might only take credit cards, leaving you unable to conduct business there also.
Heather Johnson, “5 Disadvantages of Using a Debit Card” Accumulating Money.
Jeffery Strain, “10 Debit Card Dangers” The Street.