Credit, debit, cash, or check? All of these methods of payment have their advantages and drawbacks. A debit card shouldn’t be the only tool in your financial toolbox, but it is a useful thing to have. Here are a few reasons why.
1. Convenience.
Most people now have their paychecks deposited directly into their bank accounts. That means that getting cash in your wallet involves either a visit to a bank or the use of an ATM. ATMs often charge fees, which makes using them less than ideal. A debit card gives you access to the money in your checking account without the hassle of withdrawing cash or writing checks.
2. “Round up” programs.
Debit cards such as the Bank of America debit card or the Save ‘N Up debit card have a neat gimmick to help struggling savers grow their bank account balances. The gimmick works like this- each debit card transaction is rounded up to the nearest dollar amount. For example, if you purchased a $1.49 cup of coffee, the debit would be rounded up to $2.00. The difference between the rounded number and the actual price of the purchase- in this example, $0.51- is automatically transferred from your checking account to your higher interest savings account.
Some debit cards also offer the option of rounding up and donating the difference to charity. Whether you are saving for yourself or for a cause you care about, the program is a good way to see how small acts of saving add up.
3. Accepted some places where credit cards are not.
Some businesses, such as the discount grocer Aldi, do not accept credit cards but do accept debit cards. Having both in your wallet will allow you to shop where ever you like without having to worry about how much cash you physically have at the moment.
4. Rewards.
As debit cards grow in popularity, more banks are creating rewards programs such as cash back or airline miles for using your debit card. Shop around and see what kind of deals you can find. When you can earn rewards for the purchases you make anyway, it’s like getting something for free.
5. ATM use.
If you do want to make a purchase that requires cash, a debit card will function as an ATM card, allowing you to withdraw cash. This is much more cost-effective than using a credit card and getting a cash advance; cash advances on a credit card usually begin accruing interest immediately.
6. Online shopping.
Like credit cards, debit cards are accepted by many online retailers while cash, of course, is not. Shopping online can be a great way to find low prices as well as a way to locate unique or hard-to-find items such as specialty foods, collectors items, or vintage clothing. If you want to shop on line, having either a credit card or a debit card is a must.