Categories: General Tips
Have you ever wondered when you should choose your debit card, credit card, or cash for payment? Do you know what your best option is for various payment situations? This quick guide can help to differentiate between the three and offer suggestions on the best times to use each one.
But first…how to use it! A debit card can be swiped or inserted at pretty much any payment machine that accepts debit and credit. It can also be used for online purchases. If your card has a chip (a tiny device embedded on the side of the card), insert the card into the machine and follow the prompts on the screen. If it doesn’t, swipe it through the card reader on the side.
You will be prompted to select debit or credit. Next, you’ll be asked to enter your four-digit pin into the keypad on the card reader. This is the number you selected when you first set up your debit card (not any of the numbers on the card itself). Your pin is important to remember and keep to yourself—it’s your password that unlocks the payment through the card. Many debit cards can also be used at ATMs to withdraw cash from your account if you’re out somewhere that doesn’t accept cards. Just keep in mind that ATMs at places other than your financial institution can have fees for withdrawals.
If you’re using your debit card for an online purchase, first select your card type (for example VisaⓇ), and enter the 16 digits on the front of the card under “card number”. Then follow instructions to enter the expiration date and the security code, which is usually a three- or four-digit number on the back of the card near the signature strip. Some online purchases will also require you to enter your pin, too, when using your debit card electronically.
Debit Card vs. Cash
A debit card is great for everyday purchases like gas, groceries, meals, clothing, and more. As long as you have enough money in your account, debit is convenient and effective (remember, using a debit card removes the money immediately, so there should be enough in the account to cover the expense). Also, if your debit card has a cashback or rewards system, you can be making money back while spending it. Check out the Summit Federal Credit Union options for debit cards, which all have cashback reward options.
Cash is great for small purchases, for paying back friends, and for leaving tips at restaurants or bars. Many local small businesses also have minimum charge requirements on debit cards set at $10 or $15, so if you’re buying a coffee or grabbing a quick snack locally, cash is good to have on hand. Some studies show that people who bring cash are more careful about their spending, too.
Debit Card vs. Credit
Credit cards are great for larger purchases that may need to be paid off over a period of time, for example, tuition bills or plane tickets. Ideally, you should charge only what you can afford to pay off each month. This will help build your credit score. If you don’t pay it off and leave a balance, it will cost you money in the form of interest. Credit is also good when traveling because if your credit card gets lost or stolen, it is easier to freeze the account and get refunded for fraudulent charges. Since a debit card is linked directly to your bank account, it is more challenging to protect your money if the card is lost or stolen.
On a day-to-day basis, debit cards can be best for convenience and financial stability, especially if the card has rewards and cashback. Debit cards are great for tracking spending, and avoiding going over your limit or creating debt by charging an expense that you cannot pay back.
When you open a new checking account, you will have the option of signing up for a debit card for ease in purchasing, tracking spending, and possibly earning rewards for your day-to-day financial activity.