Credit or debit?

debit card purchases now top a trillion dollars a year. this is good news for banks, since they m...  More »

debit card purchases now top a trillion dollars a year. this is good news for banks, since they make money from every transaction. minute thumbnail 12:45 pm but the news may not be so good for some consumers. money reporter stacy johnson explains. vo 1 using plastic has become so accepted its hard to imagine shopping without it. and now you even have a choice of whh plastic to use: a debit card or a credit card. vo 2 2006 was the first year that debit card transactions topped one trillion dollars. so they're certainly popular. but are they better than credit cards? vo 3 if you carry a balance on your credit card, or have trouble with debt, a debit card is obviously your plastic of choice. but if you don't carry a balance or pay an annual fe you're better off with a credit card. vo 4 there are three reasons why. first, debit transactions take the money out of your account immediately. using a credit card allows you to earn interest on your money until the bill comes. vo 5 second, people who use debit cards are more likely to overdraw their accounts. according to consumer's union, a rson using a debit card more than 20 times a year pays an average of $223 in bounced check fees. the one who doesn't use a debit card minute thumbnail 12:46 pm at all pays an average of $40. vo 6 finally, a credit card gives you greater protection if something goes wrong with your purchase, and exposes you to less potential liability if its lost or stolen. standup bottom line? if you live on a plastic diet, you're probably better off with a no-fee, no balance credit card than you are with a debit card. but remember, there's nothing wrong with paying with good old cash either.  « Less