Debit Cards vs. Credit Cards: Do You Prefer Debt, Fees, or Both?

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Debit cards have been presented as the safer alternative to credit cards. A credit card is something of a temporary loan operation, allowing you to buy things with money you may or may not have, creating a situation in which it’s easy to get into debt. A debit card, by contrast, allows you to buy things using the funds sitting in your bank account. Or that’s how most people think of debit cards anyway. As more and more customers are finding out, debit cards actually do allow you to spend money you don’t have—and banks smack you with fees for the privilege.

To avoid digging oneself into major debt, the undisciplined spender is instructed to choose a debit card over a credit card. Experts recommend that college students, for instance, go the debit card route. The traditional debit vs. credit card debate as most people have come to understand it is summed up at

Debit cards can help you maintain financial discipline. Instead of using, and potentially racking up significant, ongoing credit card debt, consider using a debit card. The fact that the purchase will be automatically deducted from your account may force you to think twice about a purchase…or at least determine that you have enough money in your account to pay for what you want to buy so that your card is not declined.

But more and more, that debit card is not being declined, even if the owner does not have enough in his account to cover the expense. The person with no money in his account can go on using the debit card—at Starbucks, the pharmacy, the grocery store, a sandwich shop—without knowing that he has no money in his account, and without knowing that his bank is charging him $30 or $35 each time his card is swiped. Because many people use debit cards frequently—it being marketed as a more convenient alternative to cash, and a safer alternative to credit cards—the fees can pile up swiftly.

Banks call these fees “overdraft protection.” It’s the equivalent of a fee for bouncing a check, but given the positive, consumer-friendly, protective spin. As in: They’re protecting you—I suppose from the embarrassment of getting your card turned down at Starbucks and (God forbid!) having to make due without a latte that day. But what this protection really does is make that $2 coffee cost you a total of $37 with the overdraft fee included.

The overdraft fee isn’t the only downside to the debit card. WalletPop lists five risks for using debit card, including the fact that you’re not afforded the same level of consumer protection as you get with credit cards. The piece, by the way, includes a tale about a young man who made a few purchases totaling less than $11—and who got hit with $140 in overdraft fees.

By some accounts, consumers are now using debit cards more often than credit cards, and as the NY Times writes, banks now make more money on overdrafts than they do on penalties from credit card usage. The Times points out some ways to avoid the fees from piling up, including:

Stop by the branch or call on the phone and ask to turn off the overdraft protection. Many banks will do this if you ask.

Of course, credit cards have their share of fees as well—including some new charges that have been introduced by banks to counter recent credit card legislation to protect consumers. One such fee is for inactivity—in other words, you’re charged for not buying stuff.

But honestly, if you’re looking to Congress or a bank as the main means to protect you from overspending, you’re in trouble. No matter the laws, no matter if it’s a debit or credit card, the only person who can truly prevent overspending is the one holding the plastic in his hand.