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Debit cards, while convenient to use, can often pose a number of risks to your financial security. One of the risks is the ease with which you can lose track of how much you’re spending.

If you’re like most people who use debit cards, you don’t write down each purchase. This is the fastest way to spend money you may not actually have.

Once your account is overdrawn, the bank will assess an often hefty overdraft fee for each purchase that overdraws your account. Common sense might dictate that the bank would simply decline any debit that overdrafts your account.

But with overdraft fees as high as $36 per overdraft, this is one of the primary ways that they actually make money. Also, most debits don’t clear your account until after close of business. So if you make several purchases over the course of a day that overdraw your account, this fact is not calculated by the bank until the end of the day.

One of the best ways to avoid overdrawing your account with your debit card use is to make sure the savings in your account far exceed the amount you may spend in a day. For some people this is $600, for others it might be $1,000.

You can also avoid accruing overdraft fees by signing up for your bank’s savings account overdraft protection. If you have a savings account with the same bank that issues your debit card, the bank will automatically transfer just enough money from your savings account to cover the overdraft or overdrafts you make with your debit card.

Essentially, your savings account will simply help you avoid being charged those pesky overdraft fees. If you choose this option, however, do make sure that you have enough money in your savings account to cover any possible overdrafts.

Another risk that comes with using debit cards is the lack of fraud protection. If a thief is able to use your debit card, the money they take or spend is deducted from your account immediately. Thieves do not even need your actual card, as long as they have the card number, they can make online purchases.

Even after you contact the bank to let them know of the fraudulent use, the money is already gone. Legally, banks have up to 20 days to restore this money to your account, while they investigate the fraudulent use.

If you use a debit card, rather than a credit card, you are putting yourself at risk in a couple of ways. For one, debit cards do not help you build good credit in the way that credit cards do.

Also, you have very little transaction protection when you pay with a debit card. Credit cards offer purchase and dispute protection.

Debit cards have a daily maximum limit on purchases, usually between $200 and $500. If, for some reason, you need to purchase something over your maximum daily limit, you cannot. Keep in mind that this is a cumulative maximum spending cap. So throughout one day, you are limited in what you may spend.

Some merchants, such as hotels, will accept your debit card as a form of payment but they create a “phantom” charge up front to cover any possible fees.

So even though your hotel room rate may be $100 per night, the hotel is likely to hold $500 from your account until several days after you check out of the hotel. This money is not available to you while it is being held as a “phantom” charge by the hotel.

Rewards offered by credit cards are very common. These range from airline miles, to cash back, so simply using those cards, you are receiving something in return. This is not the case with debit cards. There are very few debit cards that offer any additional rewards.

Saving Account

It seems that there is never a good time to start saving as each month seems to throw up one unexpected bill or another. But, if you are in a position to start saving then it is better to start sooner rather than later to get the best return on your savings and investments. So follow these five simple steps for successful saving and investing.

1. Work out and pay off your debts

If you have a large amount of debt then there is no point trying to save money as the interest rate you’ll be paying on your debts will far outweigh any return you will see on any savings. So the first thing you need to do is work out how much money you owe out in loans and credit cards (do not factor in mortgage payments) and then calculate when you can feasibly repay these debts.

Once you have repaid these debts then you are ready to start saving as even just putting to one side the money you have been paying in interest is a good start to building up a substantial savings account.

2. What are you saving for?

When you start saving it is important to have a savings goal in mind as this gives you a focus to continue saving. This is important because without a goal in mind it is easy to for go putting money into your savings account and spend it on an impulse purchase.

So you first must determine whether your goal is short term, for example, saving up to buy a new games console, medium term, a deposit for a house, or long term, a retirement fund. And once this has been determined then you can begin to structure your savings strategy and work out how long it will take to achieve your savings goal. And it is important at this point to come up with an important time frame in which to meet your savings goal as if this is unrealistic then you may become disillusioned and give up on saving altogether.

3. Create a budget

Once you have worked out how much you need to save and over what period of time you now need to make a complete list of you income and expenditure and work out a proper budget, that is one that you can stick to, for the month ahead. When creating a budget be sure to break down and factor in those annual outgoings such as car or home insurance as these are large expenses that can be easily overlooked if they are only paid once a year.

To make a successful budget you need to make a note of how much money you bring in each month and then subtract each of your outgoings, no matter how small or large. The best way to do this is to keep a record of everything you spend over the course of a month and then calculate you total outgoings and subtract this from your income. The figure you are then left with should equate to the amount that you can then put away as monthly savings.

4. Cut your expenses

Once you have created a budget and you can see exactly where your money is going each month then it is a good idea to try and cut down your monthly expenditure. If you can trim your monthly outgoings, even by just a small amount, then this can soon add up and may help you to reach your savings goal that little bit faster. For example, if you are paying £2.00 for a coffee on your way to work each morning then this will add up to between £40 and £50 per month and up to £600 over the course of a year!

5. Choose the right savings account

Once you have worked out how much money you have to put to one side each month then it is important to work out which type of savings account is right for you and financial comparison sites such as Moneysupermarket can help you decide which is the best type of account for your circumstances. However, if you are planning for a long term savings goal such as retirement then you may want or you may want to seek professional financial advice.

Article written by Les Roberts, savings journalist at Moneysupermarket.com.