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When Should You Start Using a Debit Card?

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Debit Card

A debit card can be used at nearly every payment machine that accepts debit and credit cards without the need to dole out cash or a check. These handy cards can also be used for online purchases. What differentiates a debit from a credit card is where the money is taken from. For instance, when you pay for something with a credit card, the funds are added to a balance in your credit account. Then, you pay off the balance in the future, preferably before the monthly minimum payment date. 

However, when you use a debit card, the money is retrieved straight from your bank account. Most people start off with a debit card before advancing to credit cards since it’s simpler to keep track of what is coming in and out of your bank account. It’s often easier to rack up debts on credit cards since you can continue charging; until you reach your maximum limit, that is. That’s why debit cards are great for early card users, such as 16- to 18-year-olds. In fact, most banks and credit unions give you a free debit card when you open a checking account.

What Is a Debit Card Used For?

A debit card is great for everyday purchases like gas, groceries, errands, and more. As long as you have enough funds in your checking account, debit is convenient and efficient. remember, money gets removed immediately when you use a debit card, so there should be enough in the account to cover the expense.

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Benefits of Using a Debit Card

There are multiple benefits of using a debit card, especially when starting your financial journey. This type of card is a useful option over a credit card for those who are trying to budget their expenses or prevent debt accumulation. It’s also linked to your checking account, which allows for easy access since funds are pulled directly from it. Essentially, a debit card acts like an electronic check. 

Avoiding Overdraft Fees

There is such a thing as an overdraft fee if you use your card when you don’t have sufficient funds to cover your expenses. This can be easily avoided by staying accountable and keeping an eye on your checking account. Additionally, many banks offer overdraft protection services, ranging from lines of credit to automatic charge rejection so that you cannot accidentally overdraw from your account.

No Interest or Annual Fees

Perhaps the best reason to use a debit card instead of a credit card is no interest or annual fees. Although credit cards have their own advantages, they also are known for high-interest rates and annual fees that vary depending on the credit card company. Plus, annual percentage rates on credit cards can range from 10% to as high as 32.99% if you happen to end up with a penalty interest due to late payments. However, when you pay with a debit card, you can avoid those expensive rates that result in greatly increasing the price of your original purchase.

Theft Protection

You’ll also be pleased to hear that debit cards have more protection against theft than carrying cash or credit cards because no one else can use your card without knowing the specific four-digit PIN code. Plus, the modern addition of inserting a chip on cards offers further protection and security.

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Interest-Earning Options

Yet another benefit of starting your financial journey with a debit card is that they are often linked to interest-earning accounts. Many banks offer multiple types of accounts, including interest-earning options. Usually, a minimum daily balance as low as $10 is required, but you’ll get both the positives of earning interest and the convenience that a debit card offers for cash withdrawal and everyday purchases. More specifically, this compounded monthly interest can be compared to free money being added into your account balance.

When Is the Right Time to Get a Debit Card?

There are a few determining factors based on financial responsibility and accountability that must be considered when thinking about getting a debit card. First, consider if you have a reliable source of income. Without a way to regularly input money in your account, you’ll be at risk of overdrafting if not kept in check. Also, consider your savings habits over the past six months. Do you regularly deposit a portion of your income into savings? If not, perhaps waiting to build up those financially healthy habits will be advantageous before getting a debit card. 

Another factor to think about is if you have a budget in place. This is important for everyone to have, but especially if you are just starting out. Having a spending and saving plan in place as early as possible will help you in the future. Overall, it’s up to your own judgment if you’re ready to get a debit card. Just make sure to use it wisely and responsibly! 

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