The status of using a credit card to pay for dinner, a movie, clothes or anything else you need or want immediately is a lot of fun to have -- until the bill arrives. And the joy of using a credit card, as almost everyone who has used one on a spending spree or a weekend out knows, can easily turn to sorrow a month later, if the bill isn't paid on time. Late fees, not paying off the balance each month, and 18% or higher interest rates add up and turn that $250 night on the town into a $300 debt.

With more people watching their spending in a sour economy, and the enticing lure of a credit card just sitting in their purse or wallet unused, more Americans are rethinking how they pay for things. Credit cards are so out.

Here's an example why credit cards are dangerous, according to the Delaware County Office of Consumer Affairs: On a balance of $2,000, making the minimum monthly payment, such as 2% of the outstanding balance or $20, whichever is less, can take 22 years to pay off at 19% interest. Interest payments will total nearly $4,800, which is more than double the original $2,000 borrowed 22 years ago! OK, so it gets somewhat better if the monthly payment is doubled to 4% of the balance owed, shortening the payment time to seven years instead of 22, and saving about $3,680.

Enough math for now. You get the point -- credit cards, if not paid on time -- can be a difficult way to pay off short-term debt over the long haul. Who wants that when they're not sure if they're going to have a job next month? A better way to go, at least if you want to avoid the long-term fees, is to pay as you go with a debit card.

While debit cards aren't new to the world of currency, they are being promoted a lot more lately. MasterCard hired Mr. Bill, the clay figure from "Saturday Night Live" fame, to pitch its debit cards as a way of being sure of what you're spending in an unsure economy. While a $2 cup of coffee charged to a debit card won't break anyone's bank account, people who use plastic tend to spend more than when using cash, Ed Mierzwinski, the consumer program director for the United States Public Interest Research Group, told the New York Times. Mierzwinski warns that cardholders can incur fines if they overdraw their accounts, and that the right to dispute debit transactions are not legally protected as credit card transactions are.

The federal government has a program for federal agencies to use debit cards for things such as payroll and disaster relief, so you'd think that if a government that runs the U.S. Treasury like it was a credit card without late fees goes with a pay-as-you-go method for some of its expenses, there must be something good about debit cards.

Some debit cards are a little too far out there, however. A company called Reserve Solutions offers customers to tap into their 401(k) retirement accounts with a debit card that essentially takes a loan against the account. Instead of taking money out in a lump sum, the card allows people to draw down the money as they need it. Two U.S. senators have introduced legislation that would outlaw the use of credit or debit cards with retirement accounts.

One of the latest promoters of debit cards is Russell Simmons, a founder of Phat Farm apparel. Unlike many debit cards, which deduct money from a linked checking or savings account at a bank, the RushCard is prepaid. It offers all of the same convenience as any other plastic piece of currency, but without the worry of late fees or overdrawing a checking account. Although there are still plenty of fees: $19.55 to activate; $1 per transaction, capped at $10 per month; and $1.95 to us an ATM. Not exactly free, but a better option to people with poor credit than a check-cashing store.

At a time when you don't know if you'll still have your job when the next credit card bill arrives in the mail, using a debit card and paying as much as you can afford now, without adding more debt to your bottom line, looks a lot smarter.

Aaron Crowe is an unemployed journalist in the San Francisco Bay Area. Read about his job hunt at www.talesofanunemployeddad.blogspot.com


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