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If you need to make a withdrawal from an ATM it's always better to use a debit card – assuming you have the money in your account. The reason for this is simple. When you take cash using a credit card you’re borrowing money and probably at a much higher interest rate than when you're just making purchases. Plus, you start paying interest on that money the minute you take it out of the ATM.
Give a small business a break
If you do business with a small, local merchant you could give it a break by using your debit card instead of a credit card. Most merchants hate credit cards because of the fees they are required to pay to accept then. Of course, debit cards also come with fees but they are much smaller. So if you have a favorite local merchant you could give it a break by always using your debit card. You might also use your debit card when negotiating big purchases as offering to use it would relieve the merchant from the need to process a credit card, which could save it money. In other words this could be a bargaining chip.
When paying taxes
Your local and state governments as well as the federal government are allowed to charge what's called a credit card convenience fee. It is typically about 2% of what you are paying. But when you use a debit card, there is just a flat fee of about three dollars. So if you're making a tax payment of $150 or more, it will cost less to use your debit card.
If you're offered a cash discount
Did you know that sometimes there are discounts available if you pay cash or use your debit card? As an example of this, gas stations sometimes show two prices – one for credit cards and a lower one for cash or debit cards. However, remember what we said earlier on in this article, which is that most gas stations will place a hold on your debit card for $100 that can keep your cash tied up for several days.
Use your debit card to pay utility bills
Finally, it's best to use your debit card when paying your electrical, gas or water bill. The reason for this is the same as when paying taxes. Many public utilities are allowed to charge an additional fee when you use a credit card. You may also be charged a fee if you use a debit card but it will be much less. Plus, when you use a credit card to pay for your utilities you're basically borrowing money to pay for them, which in most cases just isn't a good idea.