5 Reasons to Use Debit Instead of Credit

Use Debit Instead of Credit

According to The Nilson Report, debit card purchases are expected to increase 13% in 2008 to $1.2 trillion versus a 3% increase for credit card purchases or $1.9 trillion. This year, Visa debit card transactions could exceed credit card transactions.

For banks this is not good because they are not able to collect interest on debit transactions but helps their accounting department because they don’t have to report any losses when consumers fall behind on credit card payments.

However, banks also charge overdraft fees for debit card transactions when consumers do not have enough money in their accounts to cover an item purchased. Fourteen out of fifteen of the largest banks in the U.S. charge overdraft fees for consumers who exceed their funds.

Overdraft fees ranges from $20 to $35 per occurrence. Banks are responding much quicker to consumers who exceed their funds by charging overdraft fees the same day or the next day. In the past banks would wait a few days before charging the overdraft fee.

To combat this practice the Federal Reserve has proposed rules to restrict these abusive practices by banks.

Here are 5 reasons why use should use a debit card versus a credit card:

1. You don’t pay interest or finance charges

2. You can only spend the money you have in your account, however, some banks do allow you to exceed your funds but you are charged an overdraft fee

3. You can use debit cards or Visa check cards at many of the same retailers that accept credit cards

4. Helpful for those with bad credit who are unable to get approved for a credit card

5. Can be used like a credit card by swiping the card without entering a PIN