Debit or credit? Knowing the benefits of each card can help you manage money better.

When Morgan Robinson began working for SmithKline as a teenager in 1999, she opened a checking account with her employer's bank. She was issued a Visa debit card that could be used as a check card and for withdrawals at ATMs. But a little more than a year after opening her checking account, Robinson, 21, applied for and received a Visa card with a $1,000 credit limit, and a MasterCard with a $500 limit. Now that Robinson is graduating, which card is best to help her steer clear of debt?

CREDIT CARD OR DEBIT CARD?

Steve Rhode, president and cofounder of www.Myvesta.org, a consumer education organization, says debit, cards should be used to pay for day-to-day items. Credit cards are generally used for larger purchases, such as electronics, because they have more safeguards. With a debit card, payment for a purchase is withdrawn directly from a checking account. And debit card purchases are more likely to receive store credit, instead of a refund, for damaged items. Credit card users can make purchases without actually having the funds to cover the transaction in their checking account.

GETTING THE MOST FROM YOUR CARD

Russell Simmons, founder of Rush Communications, has teamed up with the Unifund Corp. to establish the Rush Card--a prepaid Visa debit card (www.rushcard.com). Simmons says the card is intended for individuals who don't have access to savings or checking accounts. "It protects you from the kind of problems that you [encounter] when yon write a check for one dollar more than you have," says Simmons.

Rhode cautions that debit cards, which have only been in use for nine years, haven't built the same credit worthiness in the industry as credit cards because transactions sometimes take longer to post, and some merchants don't always check for sufficient funds.

PROTECTION FOR STOLEN CARDS

Under the Fair Credit Billing Act, if a credit card is immediately reported lost or stolen, the consumer is not responsible for unauthorized purchases. Credit card holders are also protected if items are detective, damaged, or don't arrive from online merchants. Those safeguards don't apply to debit cards. You are held liable for $50 if you report, a stolen debit card within two days. Your liability increases to $500 if the card is reported within 60 days. After that, consumers are responsible for all money lost, in addition to overdraft fees.