Crossing Over: Moving from Credit to Debit

Call it the “new frugality.”

Increasingly, card transactions of the plastic variety are more likely to be made with debit than credit, as millions of Americans adopt a “pay-as-you-go" approach to personal money management.

No doubt, the numbers back that up. It used to be that credit was king. According to The New York Times (Stock Quote: NYT), in 2006, more than 1.5 billion credit cards were active in the U.S. (The Times estimates that if you stacked those cards on top of each other the pile would reach 70 miles into space and be as tall as 13 Mount Everest’s).

But as the song says,  the times they are a changing. According to a March 2009 survey by Javelin Research, debit card usage increased from 2007 to 2008, with 66% of consumers using a debit card in September 2008, compared to 57% of consumers a year earlier. 
Even younger people are getting the message on paying as you go. Javelin says that 71% of Americans aged 18 to 24 said that they had used a debit card in the month preceding the September 2008 survey. Just 51% of that same age group reported using a credit card in the same period. 


For consumers age 25-34, the numbers are also up. Seventy-six percent indicated they had used a debit card in the month preceding the September 2008 survey. Sixty-three percent of that age group said that had used a credit card in the same period.

But there’s an art to using debit cards. Sure, debit cards can do some of the same things that credit cards can do, like rent a hotel room or even rent a car, but they need to be handled differently than credit cards, which tend to be more secure and are immune to things like overdraft fees (although late payment fees are another story).

So what should you look for in switching from credit to debit?

Watch for fraud. Above all, be vigilant. Keep your PIN to yourself, and make sure you either collect or destroy all debit card receipts. Identity fraud thieves are remarkably adept at using such receipts to gain access to your card.