At a time when people are paying down their credit, some consumers are turning to their debit cards. When they overspend on their debit cards, banks make money from overdraft fees.

This year alone, banks are expected to bring in $27 billion by covering overdrafts on checking accounts, typically on debit card purchases or checks that exceed a customer’s balance.

When you hit your limit on a credit card, your charge may be denied. When you hit your limit on a debit card, you are hit with fees for spending more than is in your account.

To avoid fees, if you bank doesn’t enforce a minimum amount, create your own minimum, so instead of your actual balance at zero, consider your minimum balance as $200 or so, just enough to make some small purchases and won’t have to pay a fee.

Overdraft protection fees are great sources of income for banks. When ATMs and debit cards were first created, users who didn’t have enough money had their requests denied. Now since some cards are associated with Visa and MasterCard there is the option to charge something using the same card.

According to the F.D.I.C. study, a $27 overdraft fee that a customer repays in two weeks on a $20 debit purchase would incur an annual percentage rate of 3,520 percent. By contrast, penalty interest rates on credit cards generally run about 30 percent.

Thirty percent! No one would want to pay 30% for a charge, but overdraft fees may be as high as $35 for each charge.

Ideally, if you don’t have the money in the account, then a bank should not allow the transaction to go through. This isn’t what happens. Have a debit card? Find out about your bank’s overdraft policy. Ask whether or not you will be automatically charged if your balance falls below a certain amount. If so, then start using cash for small purchases if they are the ones that make you spend then don’t make any small purchases. Knowing that the overdraft fee annual percentage rate exceeds 3000% makes it more difficult to just use a debit card with reckless abandon. A credit card would be better in some instances, especially if you know you can pay the amount within a month.

Online bill pay doesn’t always work. Last week, I made an attempt to pay for the rental of my cable box online. I had paid online previously and thought that this would be something easy to do. Unfortunately, the cable company would not accept the payment from my account. It wasn’t my account, because other bills that I paid from the same account for larger amounts, the same day were accepted. I tried another time and my attempted payment was rejected as well.

The lesson that I learned from this is even when making payments online attempt to make them early enough so that even if you need to mail in a check or try another day, you still have time and won’t incur late charges. Since I had to send a check, I sent enough to cover several months payments, to make it worth the cost of a stamp. To pay by credit card via telephone I would have to pay a “convenience charge” which was about half the amount of the monthly rental fee.

Online payments are supposed to make your life easier but when making payments for small amounts (under $10) online payments are not always the easiest to make.

Yesterday, for the first time I had something happen to me at a store which bothered me. I made a purchase at Target which was under $50 – about $44 and some change. I swiped my card and then was given the receipt. I asked if I needed to sign and I was told that I didn’t need to sign because the purchase was under $50. “It’s something new,” he said.

This new practice isn’t something that I applaud. When I buy gas and use a credit card, I was accustomed to just putting my credit card in the machine and then pumping my gas. Now the station that I frequent has added an added layer of protection and requests the zip code of the cardholder. I think if Target’s system asked for the zip code as well this couldn’t make me as apprehensive about using my card there for purchases under $50.

Though $50 doesn’t seem like a lot of money, several charges under the minimum signing amount can easily throw someone’s account off before the theft is caught.

Not every cashier even checks the signature on the card for “smaller” purchases. A smaller purchase can be less than $100 or $50 depending on the store. A few day s go I was at a bar with a  friend who had a tab and kept track of what she consumed. When she closed out her tab, the waitress didn’t ask to see her ID. On the back of her card it says, “ask for ID” in the signature line. My friend said something to the waitress about that and she said, oh, “I didn’t pay attention to that.”

Being diligent about using your credit card and also having diligent cashiers helps decrease credit card fraud.

If you drop your credit card in a store and someone makes several purchases, they may not be asked to sign anything, making it more difficult for you to prove that it was fraud. This is just another precaution to take when you are checking out at the store. Don’t take your card out until the last minute or if you have it in your hand, make sure you cover the numbers on your card so a thief won’t be able to take a photo of your credit card number. If you lose your card, report it lost right away.

Are a you a fan of just charging it all and then paying the bill when it comes? According to CreditCards.com that may be damaging your credit score. Not only where you buy but what you buy seems to have an impact on a credit card company’s profile of spenders. Prior to the new credit card law, companies would  use the information about your purchases to lower your spending limit.

This made me reflect on two young ladies I saw making purchases of less than $15 at a thrift store. Would that purchase reflect on their credit score or spending habits? The only time I spend less than $15 on a credit card happens when a large department store has a special sale and you get an additional percentage off of any purchase made with the store’s credit card.

Cash on the other hand for certain purchases is hard to trace. Granted, if you are making a small purchase and you have a problem with an item, you would be less likely to be upset about a faulty $15 dollar item than you would for a faulty $150 or $1500 dollar item.

Where and how much you spend with your credit card, gives credit card companies an accurate picture of who you are – at least through your purchases. If you only use your purchases for certain items, then they have a flawed picture. But if you use cash for many of your purchasesthen credit card companies will have a skewed picture of you.

For an example of what types of purchases will affect your credit score, try the interactive shopping cart. Certain purchases decrease your score considerably, while other seemingly innocuous purchases will raise your score considerably.

You can’t always pay for items with cash, especially online purchases but if you are prudent in your spending with your credit card, then your score and credit limit may suffer less.