Credit vs. Debit Cards: Weighing the Options

Still, paying a $30 overdraft fee on a small transaction converts to a penalty rate that dwarfs even the worst credit cards.

(If you have money in multiple accounts, some banks may offer overdraft protection with no fee, so check to see if that's a possibility for you.)

Advantage: Credit (unless you have a serious debt-accumulation problem)

Fraud Protection

Credit cards have a large window in which to report fraud -- over a month in some cases -- given the lag time between your purchase and when you receive your statement in the mail. In general, you are liable for up to $50 in the case of a fraud, but many card companies waive even that amount.

With traditional debit cards, on the other hand, you have just 24 hours to report a loss before any money taken fraudulently is gone for good. If you report it in time, you are similarly liable for $50, but the bank can take up to 20 days to replace the rest of the money in your account.

Check cards, however, have recently improved their security packages. Many now offer zero liability fraud protection -- the same as credit cards.

Advantage: A tie, given the new protections afforded by check cards

Convenience

Some retailers, such as Costco(COST) and other warehouse stores, don't accept credit cards because credit card companies charge them a fee on each credit card purchase.

Meanwhile, debit cards are accepted by Costco and other credit-fearing retailers, since they don't get charged when consumers use a debit card with their PIN. Still, banks are always looking for ways to increase fee revenues, and some are quietly tacking on user fees when consumers use their debit card and PIN. The fees can range anywhere from a dime to a dollar or more.