Hidden Debit Card Risks
When you need to make a purchase but do not like carrying cash with you, a debit card is a great tool. The bank releases the money electronically for the purchase just like cash and your account is debited the amount, hence the name. This can be a convenient way to pay for anything and a way to carry little cash as most stores take debit cards as a form of payment. As with every type of payment, there are downsides to debit cards that are often overlooked. It is important to know the risks and the rewards of any form of payment and consider them before using any debit card for purchases whether online or at your local store.
Debit cards do not have the inherent protection seen with credit cards. When you use a credit card for purchases, you are protected against theft and any charges after a theft are taken care of by the credit card company. Debit cards are protected to some extent, but not as thoroughly as a credit card. That is something to consider if you are in a high crime area. Credit card and debit card theft is something that happens every day, so protection can be a huge plus.
Another consideration is that money used to purchase goods and services is removed from your account in real time with a debit card. If you do not have enough to cover the purchase, your account will be over-drafted and you will assessed a fee per transaction resulting in the possibility of resorting to a payday loan to cover the costs. Regardless of the amount of transaction, you could incur a fee of up to $30, so if you have three transactions of $1 a piece, you could pay up to $90 for that mistake. It is wise to leave a cushion in your checking account for this possible situation. Many banks profit from the mistakes of their customers.
Often when making a purchase where the final amount is unknown, companies put holds on debit cards for more than the purchase amount to cover themselves in case of bank mistakes of fraud. This sometimes occurs at gas pumps and bars and nightclubs where the final tab is not known. They hold up to $100 depending on the situation and that money is unavailable for days as you wait for the hold to come off of your account. That can be inconvenient if you need the money for something such as a bill in the time frame of the hold.
Although debit cards can be convenient and easy to use, there are some disadvantages over cash that can be seen. By using cash and credit cards, you will not see these restrictions as often and you may not have any fees or holds on your account by using alternate methods of payment. Awareness is essential and investigation of the terms and conditions of your debit card is essential before implementing it for payments on a daily basis.
This entry was posted on Wednesday, September 2nd, 2009 at 8:48 am and is filed under Credit & Debit Cards. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.
