More consumers turn to debit to avoid credit card debt

Debit cards are safer than cash and take less time to use when making a purchase than checks, making them an ideal payment option when consumers want to avoid dealing with additional credit card debt, according to a report from USA Today. Like credit cards, they're accepted almost everywhere. But unlike credit, debit carries no interest rates or late fees, meaning it is relatively hassle-free.

As a result, many consumers have turned to their debit cards in recent years, and in 2009, the number of transactions on these pieces of plastic surpassed those on credit cards for the first time, the report said. In fact, 80 percent of consumers own debit cards compared to 78 percent who have credit cards.

For similar reasons, 70 percent of consumers plan to use either their debit card or cash this holiday season, rather than deal with more credit card debt, the report said.

However, debit cards aren't better than credit cards in every way, the report noted. When it comes to fraud and theft protection, credit cards are typically far safer than their counterparts. In fact, according to the American Bankers Association, fraud losses from debit cards climbed to $788 million in 2008 as more consumers used them to make payments. That number is up from $662 million in 2005.

The report said most major financial institutions and debit card issuers offer zero liability policies for instances like these, but not all unauthorized transactions fall under this protection. In other cases, consumers can lose these guarantees if they wait too long to notice or report a theft, or behave in ways their card's issuer views as irresponsible. In addition, even those who are covered may not get their stolen money back right away, as the institution may first conduct an investigation.

Consumers who want to avoid credit card debt have leaned more heavily on alternative payment methods in recent months, and have cut back on spending with their credit cards as a result. Some have also opted to increase the amount they pay into their debt every month to more quickly decrease their remaining balance.