A Debit Card has become a popular alternative to credit cards with consumers because they only allow you to spend what you have in your checking account. However, its use poses some dangers that make it inferior to credit cards for several reasons that you may not be aware of.
You have fewer consumer protections with debit cards. With a credit card, you have 60 days to report fraudulent activity and dispute the charge with your credit card company. But with a Debit Card, you only have two days to report fraudulent charges and the money has left your account. Under the law, with Debit Card fraud, banks have ten business days to give you your money back. However, unlike with credit card fraud, which only requires some paperwork, with Debit Card fraud, you have to fight to get your money back!
When you use your Debit Card at a gas station, hotel, or rental car company, they will put a hold on your checking account, typically for four days. Should you have outstanding checks that someone then tries to cash, it could cause them to bounce, resulting in heavy fees against you.
The company that you pay by using your Debit Card may do a hard inquiry on your credit, which will result in lowering your credit score.
Here are places it is recommended that you do not pay by Debit Card:
- Independent ATMs – You run the risk of skimmers. While skimmers can be found on bank ATMs, they’re less likely because there are often security cameras in place.
- Pay at the pump – You run the risk of skimmers.
- Grocery Stores – You run the risk of skimmers. Twenty Save Mart and Lucky brand locations throughout California were hit by criminal rings that put skimmers on the credit/debit card readers at self-check lanes.
- When you’re buying online – If you don’t get your merchandise, if you have paid by credit card, you are able to do a chargeback during a 60-day window. With a Debit Card, you are not.
- At a restaurant – Because there is high employee turnover at restaurants, a dishonest employee can get hold of your Debit Card digits and fraudulently charge with little recourse by you.
- Booking Advanced Travel – With an economic downturn causing leisure travel businesses like cruises and some airlines to go out of business, you are better off to use a credit card. With a credit card you can do a chargeback if you are unable to get the travel you have paid for.