A debit card is another way of paying cash. When you put it down, you’re authorizing the merchant to take the money directly from your checking account. Most ATM cards can also serve as retail debit cards today (they have a Visa or MasterCard logo on their face). You can use them in most of the outlets that accept credit cards, including shopping sites on the Internet. Here’s why they’re so popular:

Credit cards let you pay in the hereafter, allowing you a misty view of what you can afford. Debit cards limit you to the cash you actually have. To avoid “bouncing” a debit, you can add overdraft protection to your bank account. A funny thing about overdrafts–borrowers tend to pay them off rather than string them out, as you might with credit-card debts.

When you use your card at a drugstore or supermarket, you can usually ask the cashier to add $50, $100 or more to the bill and hand it over in cash.

If you pay with a credit card that carries a balance, you’ll start owing interest on each purchase from day one. You avoid that expense by using a debit card instead.

On the downside, debiting doesn’t register on your credit history. To build a good record, you still need a credit card, paid on time. Debit cards give you less protection from fraud than credit cards do. And, only now, can more users start to earn mileage or other rewards. You can’t even get the rewards unless you handle your debits in certain ways. That means knowing more about how the system works.

With debit cards, there are two ways to pay. You can swipe your card through a machine and enter a personal identification number (PIN). Or you can sign a receipt without entering a PIN. Retail stores usually take only signature debits (or virtual signatures on the Web). Supermarkets ask you to swipe and then let you choose between credit and debit. If you press debit, you enter your PIN. If you press credit, you sign for the purchase, but it’s still a true debit (it doesn’t switch to a credit card). In both cases, the payment comes directly out of your account.

In general, you’re better off with signature debits. Here’s why:

A few banks charge 10 cents to as much as $2 whenever you use your PIN. There are typically no such fees for signature transactions.

Points toward gifts and frequent-flier miles are offered by 22 of the 50 largest debit-card issuers, with more to come. Among those with programs: Chase, Wells Fargo, Bank of America and Citibank. Most programs, however, give points only for signature debits, or give more points for signatures than PINs. In either case, you don’t get much when the programs are free. For rewards that match those on credit cards, you have to enroll and pay $20 to $65 a year. At that rate, it takes a lot of debiting just to break even.

Visa and MasterCard advertise “zero liability” if a crook uses debits to empty your account. Some banks offer this protection only on signature debits (ask if your PIN debits are protected, too). Even then, you may have to report the loss within a fixed number of days. If you’re late, tough luck–unless there’s a really good excuse. Fraud could cost you everything in your bank account plus the maximum overdraft. (With credit cards, by contrast, you’re usually fully protected against fraud, or at most out $50, no matter when you report the theft.)

PIN transactions were considered especially safe until three major data breaches occurred last year. Huge caches of card numbers with PINs floated into wicked hands. PINs are still safer than purchases based on signatures alone, but as long as your card can be used that way, you’re exposed. Security isn’t good enough, especially on Web shopping carts.

So far, only a tiny percentage of hacked data turns into identity theft–mainly because the numbers are harder to use than you realize, says analyst Tim Sloane of the Mercator Advisory Group. It takes elaborate procedures to open fake accounts wholesale or handle stolen goods. Crooks might need unsuspecting “mules” to receive packages (they place work-at-home ads, recruiting “reshippers”). They have to be able to forge cards in high volumes and use them fast. Most frauds still arise the old-fashioned way–from cards stolen individually, maybe by someone you know.

My best debit rule: don’t use the cards on the Web. With your bank account open, you risk too much. Order by credit card or order only by phone. I love debiting, but you should think safety first.