Q: Which payment method is the best: cash, debit, credit or checks?
A: This depends on how disciplined you are and the amount of your purchase. For small purchases under $25, I would recommend using cash or a check. Using cash will help you cut down on impulse buying and avoid any credit card fees. The one instance when paying with a credit card makes sense over using debit, cash or a check is when you are purchasing a big-ticket item, like a TV. Many credit cards offer extended warranties on major purchases such as TVs, or extra insurance on things like trips. Using a credit card is also a protection from carrying around a lot of cash.
Q: Which is better for getting cash, using an ATM or receiving cash back on purchases?
A: This is easy. I call paying out-of-network ATM fees "nuisance fees" because they are the easiest to avoid. If you are weighing using an in-network ATM versus getting cash back at a register, it really does not matter since you will not incur a fee from either option. If you are considering an out-of-network ATM versus getting money back at the register, then I would definitely prefer the debit card.
Another option you may consider is using an Internet bank checking account that refunds all of your ATM surcharges. This is a great option, especially for someone who travels a lot.
Mellody Hobson's Extra Tips:
If you lose your debit card, report it to your bank right away. The law gives less protection for fraud liability that occurs with your debit card than your credit card. If a lost or stolen debit card is reported within 48 hours, cardholders are not responsible for more than $50 of fraudulent use. If it is reported two to 60 days afterward, cardholders could be held accountable for up to $500 of fraudulent charges. After 60 days, though, consumers face unlimited loss.
For reoccurring payments, such as utility bills, use electronic payments through your bank. The payment will get there faster, and you do not have to worry about postage or physical checks. You can also set up automatic payments for items that never change, like your mortgage. This way you will never miss a payment or be late.
Watch out for extra fees when closing your account. Some major banks charge you to close your account if it has only been open for a certain number of days. The simple reason is that it costs a bank about $20 to open a bank account, so it needs to make sure you keep your money long enough to justify this expense. For example, PNC Bank charges you $25 if you close an account that has been open only 180 days or less. The easiest way to avoid this charge is to make sure that you choose a bank where you know you will keep the account open for at least a year or longer. Click here to return to the "Good Morning America" website.