NEW YORK (CNNfn) - They're easy to use, interest free, and some say they can help wean credit card users from debt dependency.
But if you are among the more than 140 million debit card holders in the United States today, experts say you'd better be cautious. The wildly popular payment method can just as easily wreak havoc on your finances - faster than you can say "PIN number."
"The use of debit cards has become an accepted payment method, with two of three households owning a debit card," said Claire Peerson Braverman, senior vice president of market research firm BAIGlobal.
In the company's report last year, however, she stressed that the "expansion of debit card use, from cash access to direct merchandise purchase, has disrupted cardholders' usual methods of record-keeping and control."
The ubiquitous cards, which allow for ATM withdrawals and merchandise purchases, aren't always the best option for consumers with spending discipline problems.
"Their checkbook register just doesn't do the job anymore," Braverman said. "People literally don't know how much money they have."
The check card
Debit cards, or check cards, act exactly as a check, but they eliminate the hassles of getting the paper version approved. Each time you use it, the amount of your transaction is deducted directly from your checking account.
You won't incur interest charges unless you dip into an overdraft line of credit linked to your checking account. Some banks, however, charge an annual, monthly or per-transaction fee for using your card. Be sure to shop around before you sign your name on the back.
Most debit cards, these days, double as an ATM (automated teller machine) card, allowing you to access money at millions of bank machines worldwide. Many, too, are co-branded with VISA or MasterCard, which allows you to purchase items anywhere these credit cards are accepted.
The purchase, however, is still deducted from your checking account.
That's where some consumers get confused.
In its survey, BAIGlobal found a large number of respondents who use debit cards were unclear on how the cards work, especially those that carry the credit card logos.
"In some cases we found card holders who thought they had a hybrid credit/debit card," Braverman explained. "Issuers have to be especially careful to explain the distinction."
MasterCard apparently agrees. Spokeswoman Pamela Skillings said the company teamed with consumer advocacy group Call For Action to implement an educational campaign for debit card holders.
Part of the campaign focused on teaching consumers the various uses, fees and limitations associated with debit cards. The other part seeks to change the mindset of debit card holders who fail to monitor the contents of their wallet.
According to the company's survey, 42 percent of respondents could not list by memory all cards in their wallet and 59 percent did not know it was important to report their debit card missing immediately after discovering it was gone. Only 12 percent said they keep a written list of wallet contents.
Some experts also suggest that debit cards can lead to overspending, due to the cards' convenience and consumers' lack of budgeting.
"If you went to McDonald's (MCD) and didn't have enough cash, you wouldn't get that apple pie," said Robert B. McKinley, with CardWeb.com Inc. "I think that's what you are seeing now with debit cards."
McKinley cited an industry study done five years ago that found that consumers who paid by credit card spent nearly 30 percent more in fast food establishments than their cash-paying counterparts.
"I can't imagine why that wouldn't carry over for debit cards," he said. "If you go for groceries and you're paying with cash, you may limit yourself on items, but if you use a debit card, [you might have less restraint]."
BAIGlobal's studies also revealed that many card holders are having a tough time keeping track of cash flow and balances in their accounts. Many were simply overwhelmed with the variety of ways to access their account, including checks, direct deposit and withdrawal, on-line banking, and debit cards.
Add that to the fact that many accounts have multiple users, and you're looking at a nearly impossible job for the record-keeper in the house.
How do you manage it all? Experts say consumers who use debit cards and want to maintain a balanced checkbook have no choice but to write down each transaction they make.
BAIGlobal's studies found card holders use a variety of make-shift ways to track their funds, including "back-of-the-envelope" ledger systems and daily calls to issuers' 800-number customer service lines.
It doesn't matter how you do it. Just get it done, said Joy Thormodsgard, chief operating officer for the National Foundation for Consumer Credit.
"I think you have to create a system that works for you," she said. "Some people write what they buy on the back of their receipts, they keep them in one place, and before they retire for the evening they write them up in a log."
You should also always check your monthly checking account statement to make sure there are no discrepancies and the numbers add up.
(Click here for tips on keeping track of your debit card from MasterCard and Call For Action)
The flip side
If you follow those simple steps, experts say, there's no reason why you should reject the "tremendous" convenience that debit cards provide.
Many credit counselors, in fact, advise cash-strapped clients to swap their credit cards for debit cards to help keep spending in check (so to speak). Knowing that the money on their card is limited to the sum of their checking account, they say, can be an effective deterrent for those who regularly spend beyond their means.
"Debit cards are one of the hottest growing products out there today," said John Hall, a spokesman for the American Bankers Association. "Consumers love them because (they're) easier than checks, safer than cash and there are no interest rate charges."
He agreed that "consumers should always keep records of their financial transactions and balance their statements."
Thormodsgard, of the NFCC, noted the cards are a "a fabulous convenience" if you keep close tabs on your spending.
Failure to do so, she said, can not only disrupt your financial record keeping, but it can lead to repeat overdraft charges. And those can add up fast.
"It's got to come down to the consumer," Thormodsgard said. "You really need to keep track of where you are and be accountable to yourself. If you don't know where your money is going you cannot manage it and therefore you are not in control."
--by staff writer Shelly K. Schwartz