Debit Card, Cash or Lay-Away?

Currently more people are using debit cards than credit cards. This is a good thing because consumers aren’t spending money that they don’t have.  With debit cards it is important to treat your card like cash, since debit cards do not offer the same amount of protection as a credit card. There is no federal requirement for debit card liability so your bank may or may not offer you protection. Credit cards all offer some type of protection.

As credit card companies are tightening the restrictions on credit cards, individual retailers are offering more payment plan opportunities. Some people might remember the store payment plan as lay-away. Instead of paying for an item and taking it home, lay-away allows consumers to make payments on an item before taking it home. K-mart, Marshalls and T.J. Maxx offer lay-away. Though with fee that you pay may end up being equal to charging an item and taking it home with you. Lay-away offers credit for those with poor or no credit.

Cash is still an option even though if your cash is stolen or lost, you have no protection.  “Although most banks have voluntarily extended zero liability to debit cards if there are fraudulent charges, there are no federal requirements says Curtis Arnold of Cardratings.com.” Though losing cash is better than losing a debit card, which is an easy avenue for identity theft. Also, if you use your debit card for certain transactions a minimum amount may be deducted from your account rather than just the amount that you minimum amount. Online purchases with a credit card are safer and offer more protection than a debit card.

If you really need an item, putting it in lay-away won’t allow you to take an item home that same day. Though if you see an item at a great sale price and have no credit history, it is possible to get the item and make payments to get it. Saving up for an item and paying cash (or using a credit card like cash) is a better way of saving money.

No form of payment is fool proof.  Also, there is no payment type that is best but that depends on the individual. If you charge everything and then pay your bill in full at the end of the month, that may work for you. Another person may have more comfort in using a debit card but has a cushion in their account so there are no surprises or overdraft fees, while cash may be king for others. A combination of all three may work, but if your credit card is stolen you have some recourse, also you can refute fraudulent charges on your account. It’s more difficult to get the money back into your account if someone steals your debit card or ATM card.