Home > Personal Finance > 7 Times to Use a Debit Card Instead of a Credit Card

Comments 0 Comments

Credit cards are renowned for their convenience and security, but they are not the best tool for every job. The biggest problem with credit cards is the fact that cardholders can easily use them to get them into debt, which results in costly interest charges. Other potential drawbacks of credit cards include the high fees charged to merchants and the fact that credit cards are not universally accepted.

But rather than keeping some spare cash under your mattress, here are seven times when a debit card can do the job instead.

1. If you’re in over your head with credit card debt

Those who are carrying a balance on their credit cards are assessed interest charges each day on their average daily balance. That means that each new charge immediately increases the amount of interest incurred on the account. To break that cycle, shoppers can use debit cards. A debit card does not involve borrowing money or paying interest.

2. To withdraw cash

Using a credit card to get cash may be the worst thing that you can do with it. If you do it, you will likely get hit with cash advance fees and a higher, cash advance interest rate. In addition, the money withdrawn will immediately begin incurring interest, as it is not eligible for a grace period.

3. When you are buying a money order

There is no way to purchase a money order with a credit card, but many stores will accept debit cards in addition to cash.

4. If you want to give a small business a break

Many merchants hate credit cards due to the high cost of the merchant fees that they must pay to accept them. Merchants are also charged a fee to accept debit cards, but it is much smaller. So if you would like to help out a small business in a small way, you can choose to use your debit card rather than your credit card. And if you are negotiating the price of a large purchase, offering to use your debit card might make a difference, especially since merchants often overestimate the cost of processing a credit card.

5. When you pay your taxes

Local, state and federal governments are allowed to charge a credit card convenience fee, which is typically about 2% of the amount paid. On the other hand, debit cards incur a flat fee of about $3, so it will cost less to use a debit card if you are making a payment of about $150 or more.

6. To pay utility bills

Like taxes, many public utilities are also allowed to charge customers additional fees to pay their bills with a credit card, but these fees can be much lower if you use a debit card.

7. When offered a discount for cash or debit

While credit card surcharges are rarely allowed and imposed, discounts for cash and debit cards are available in many instances. For example, gas stations sometimes show two prices, one for credit cards, and a lower price for cash or debit cards. Just be aware that most gas stations will place a hold on your debit card for $100, which can remain for several days.

More Money-Saving Reads:

Image: iStock

Comments on articles and responses to those comments are not provided or commissioned by a bank advertiser. Responses have not been reviewed, approved or otherwise endorsed by a bank advertiser. It is not a bank advertiser's responsibility to ensure all posts and/or questions are answered.

Please note that our comments are moderated, so it may take a little time before you see them on the page. Thanks for your patience.

Credit.com receives compensation for the financial products and services advertised on this site if our users apply for and sign up for any of them.

Hello, Reader!

Thanks for checking out Credit.com. We hope you find the site and the journalism we produce useful. We wanted to take some time to tell you a bit about ourselves.

Our People

The Credit.com editorial team is staffed by a team of editors and reporters, each with many years of financial reporting experience. We’ve worked for places like the New York Times, American Banker, Frontline, TheStreet.com, Business Insider, ABC News, NBC News, CNBC and many others. We also employ a few freelancers and more than 50 contributors (these are typically subject matter experts from the worlds of finance, academia, politics, business and elsewhere).

Our Reporting

We take great pains to ensure that the articles, video and graphics you see on Credit.com are thoroughly reported and fact-checked. Each story is read by two separate editors, and we adhere to the highest editorial standards. We’re not perfect, however, and if you see something that you think is wrong, please email us at editorial team [at] credit [dot] com,

The Credit.com editorial team is committed to providing our readers and viewers with sound, well-reported and understandable information designed to inform and empower. We won’t tell you what to do. We will, however, do our best to explain the consequences of various actions, thereby arming you with the information you need to make decisions that are in your best interests. We also write about things relating to money and finance we think are interesting and want to share.

In addition to appearing on Credit.com, our articles are syndicated to dozens of other news sites. We have more than 100 partners, including MSN, ABC News, CBS News, Yahoo, Marketwatch, Scripps, Money Magazine and many others. This network operates similarly to the Associated Press or Reuters, except we focus almost exclusively on issues relating to personal finance. These are not advertorial or paid placements, rather we provide these articles to our partners in most cases for free. These relationships create more awareness of Credit.com in general and they result in more traffic to us as well.

Our Business Model

Credit.com’s journalism is largely supported by an e-commerce business model. Rather than rely on revenue from display ad impressions, Credit.com maintains a financial marketplace separate from its editorial pages. When someone navigates to those pages, and applies for a credit card, for example, Credit.com will get paid what is essentially a finder’s fee if that person ends up getting the card. That doesn’t mean, however, that our editorial decisions are informed by the products available in our marketplace. The editorial team chooses what to write about and how to write about it independently of the decisions and priorities of the business side of the company. In fact, we maintain a strict and important firewall between the editorial and business departments. Our mission as journalists is to serve the reader, not the advertiser. In that sense, we are no different from any other news organization that is supported by ad revenue.

Visitors to Credit.com are also able to register for a free Credit.com account, which gives them access to a tool called The Credit Report Card. This tool provides users with two free credit scores and a breakdown of the information in their Experian credit report, updated twice monthly. Again, this tool is entirely free, and we mention that frequently in our articles, because we think that it’s a good thing for users to have access to data like this. Separate from its educational value, there is also a business angle to the Credit Report Card. Registered users can be matched with products and services for which they are most likely to qualify. In other words, if you register and you find that your credit is less than stellar, Credit.com won’t recommend a high-end platinum credit card that requires an excellent credit score You’d likely get rejected, and that’s no good for you or Credit.com. You’d be no closer to getting a product you need, there’d be a wasted inquiry on your credit report, and Credit.com wouldn’t get paid. These are essentially what are commonly referred to as "targeted ads" in the world of the Internet. Despite all of this, however, even if you never apply for any product, the Credit Report Card will remain free, and none of this will impact how the editorial team reports on credit and credit scores.

Your Stories

Lastly, much of what we do is informed by our own experiences as well as the experiences of our readers. We want to tell your stories if you’re interested in sharing them. Please email us at story ideas [at] credit [dot] com with ideas or visit us on Facebook or Twitter.

Thanks for stopping by.

- The Credit.com Editorial Team