If you ask radio and TV consumer reporter Clark Howard what he thinks of debit cards, you are likely to hear him call them “piece-of-trash fake Visa and fake Mastercards.” This hatred stems from security issues that come with debit cards. If a crook steals your debit card and wipes out your bank account, it is more difficult to get your money back than if the same thing happens with a credit card. There are ways you can protect yourself if this happens, and there are other things you can do to ensure you use your debit card to your benefit instead of your detriment.
Protect Against Theft
If a thief steals money from your bank account using your debit card, financial institutions must investigate within 10 days. It could take 45 days, and as long as 90 days for some transactions, to get your money back. If you are like most folks and cannot get by with an emptied bank account for that long, keep a second account that you use only for debit card transactions. That way, you have a backup. Notify your bank within two business days of the theft. That way, the most money you are liable for is $50, the same as in the case of credit card theft, according to the Electronic Fund Transfer Act. If you wait longer than two business days to report a debit card theft, you could be liable for up to $500. If you don’t report the theft of a debit card within 60 days, you might not get any money back. Don’t think that your PIN is automatic protection against theft. Criminal rings put skimmers, which read your card swipe and the numbers you push, on debit and credit card readers, typically at grocery stores, explains Howard.
Keep Accurate Records
If you don’t know exactly how much you have in your bank account, you can overdraw. Don’t assume a purchase will be denied if you lack sufficient funds. The bank might not settle all transactions until the end of the day, and you might have made too many withdrawals, resulting in a bounce fee. Also, if your account is set up with overdraft protection, your bank might happily approve the overage as a convenience to you because it can charge you a hefty fee for each transaction that goes over your account balance. Don’t rely on receiving your balance information from the bank, which may show that you have more money in your account than you really do. Record every transaction as soon as you make it, and subtract the amount from your balance immediately.
Reward cards usually are associated with credit cards, but some debit cards offer rewards, too. Target offers a reward debit card that gives 5 percent cash back on Target purchases made using the card. Nordstrom also offers a reward debit card that gives store discounts or cash back. Many gas stations offer reward debit cards, too.
Don’t use your debit card for large online purchases. When you use a credit card, it’s no problem to dispute the charge if the product is defective or arrives damaged. This is not necessarily the case when you use a debit card because the merchant already has your money from your bank account; you lack leverage to get the company to make good on the purchase.
- Clark Howard: Protect Yourself if You Use a Debit Card
- Clark Howard: Don't Use Your Debit Card at the Supermarket
- ConsumerReports.org: Target to Offer its Credit- and Debit-Card Users Instant 5 Percent Discount
- Clark Howard: A Type of Debit Card that Clark Actually Likes
- Richmond-Times Dispatch: Consumer Reports - Five Debit Card Don'ts
- Washington State Department of Financial Institutions: Debit Card Frequently Asked Questions
- Federal Trade Commission: Credit, ATM and Debit Cards - What to Do if They're Lost or Stolen
- Comstock/Comstock/Getty Images
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