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By Roger Wohlner / GoBankingRates
October 20, 2015

Conventional wisdom suggests that it’s better to make purchases with a credit card as opposed to a debit card. There are various reasons for this including the fact that payment isn’t due until the end of your credit card billing cycle. Because debit cards are linked directly to your bank account, the money comes out almost immediately and might leave you short on cash for the month.

Still, there are times when using a debit card is preferable. Here are five surprising times it’s smarter to use your debit card.

1. When You Are in Heavy Credit Card Debt

Many financial experts recommend that consumers with extensive credit card debt utilize their debit cards whenever possible. According to Beverly Harzog, consumer credit expert and author of the bestselling book “The Debt Escape Plan,” using a credit card can lead to an increase in overall debt.

“If you are in credit card debt, you should step away from the credit cards,” she wrote. “Do not increase your debt. Start working on a strategy to get out of debt, and in the meantime, use your debit card for your expenses.” She goes on to note that carrying a debit card is far safer than walking around with a pocket full of cash.

Along with increased debt, using credit cards can result in you paying more interest over the long term. According to Gerri Detweiler, director of consumer education for, “If you carry a balance of any amount on your credit card, chances are you are charged interest on all purchases from the date you make them. Using a debit card for purchases where you must pay with plastic can make sense in that situation.”

The message here is clear. Whether you feel that credit cards are a better way to pay for purchases, the worst thing you can do is to continue to add to your credit card debt if you are already in over your head. Debit cards enable you to pay as you go while giving you time to devise a plan to reduce your debt.

2. When You Want Cash Back With Your Purchases

If you’re looking to get cash back with your in-store purchases, debit cards are likely the way to go. Unlike credit cards, most debit cards allow consumers to get cash back on a sale without paying a fee. Ryan Guina of the website Cash Money Life wrote, “It’s better to use a debit card if you want cash back. For example, a pack of gum might cost $1.50 and I can get cash back. Or I can pay $3 to access cash from my ATM.”

Additionally, debit cards can be ideal for customers seeking cash advances. According to Harzog, most credit cards levy cash advance charges from day one. Further, the cash is very expensive because interest is charged at the cash advance rate. On the other hand, debit card cash advances might be free of charge.

3. When You Want to Save on Transaction Fees and Exchange Rates

Another time to consider using a debit card versus a credit card is when traveling outside the country. Not only do debit cards tend to offer better exchange rates than credit cards, but some even waive foreign transaction fees. If you’re planning to travel for work or pleasure in the coming months, you might want to talk to your bank about the benefits of using a debit card overseas.

Despite their many benefits, debit cards might not offer the security of credit cards for international travel. According to Harzog, “credit cards usually offer better protection when it comes to unauthorized purchases. So before you leave for your trip, call your bank and ask about liability issues.”

4. When You Pay Your Taxes Online

Debit cards might also be more appropriate if you intend to pay your taxes online. The fact is that there are several government-approved payment processors through which tax payments can be made. You should check with each of them regarding the use of credit cards versus debit cards and compare transaction fees.

Typically, debit cards charge customers a flat fee while credit cards charge a percentage of the total. According to the IRS website, the average convenience fee for credit cards is 1.87 percent to 2.35 percent while debit customers pay an average of $2.79 total. It’s important to realize that the IRS sets limits on how often you can make payments with a debit or credit card. Visit the frequency limit table on the IRS website for details on limits by type of tax payment.

In most cases, customers who pay with debit and credit cards can’t cancel payments or make federal tax deposits. Additionally, payments exceeding $100,000 will likely require you to coordinate with your provider. If you overpay on your taxes, the IRS will refund your money after the return is processed unless additional debt exists in your account. It is important that taxpayers understand these rules before using their debit cards to pay their taxes online.

5. When You Wanted to Keep Out of Debt

Clearly the best way to avoid getting into credit card debt is to avoid using credit cards in the first place. There’s no shame in admitting you have trouble with certain aspects of money management. If you want to keep out of debt and doubt your ability to use credit cards responsibly, a debit card might be the better choice.

Additionally, customers can take steps to avoid overspending on debit cards. Nowadays, most checking accounts offer overdraft protection. If you attempt to use your debit card without sufficient funds in the bank, your card will be rejected. By turning down overdraft protection, you can help keep your spending habits in check.

While debit cards obviously offer numerous perks, consumers should be aware that paying with this method isn’t appropriate in all circumstances. When you use a debit card, you enter a pin number, and the funds are deducted instantly from the account that is linked to your card. On the other hand, when a credit card is used, a signature authorization is required. The funds might be instantly deducted from the bank account that is linked to the card. As a result, factors like type of transaction, transaction urgency and the level of protection required should all be assessed before using a debit card.

Typically, debit cards are most appropriate when:

  • The receiving party needs to be paid immediately.
  • You are watching your finances closely or recovering from credit card debt.
  • You want to minimize various banking fees and charges.

While credit cards are a favorite among consumers because of the convenience factor, these small pieces of plastic can also get people in trouble. Using a debit card instead allows you to limit spending and avoid racking up additional debt. The bottom line is to make a choice based upon the type of transaction you’re conducting and your own personal circumstances.

This article originally appeared on GoBankingRates.

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