Debit cards feel like a safer choice than credit cards. You won’t rack up interest with a debit card, and the money comes out of your account right away. We love these debit card features, but we also know that debit cards aren’t perfect. Here are some potential problems with relying heavily on a debit card:
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Using debit cards when you make purchases online or at the store leaves your bank account vulnerable to hackers, thieves and fraudsters. Swipe that debit card at a big chain store and your data could fall prey to the kind of large-scale hacks that have made headlines in recent years. Credit cards, particularly ones with EMV chip technology, do a better job at keeping your information secure.
Overdraft fees on debit cards can be a killer. Now, not all banks allow customers to overdraw their accounts, and some banks let you opt out of overdraft services. But if you can overdraft and do, you’ll face fees that can quickly add up. Banks rake in billions every year from fees charged to customers who overdraw their accounts. To avoid these fees, opt out of overdraft services or set up alerts so you’ll know when your balance is running low. Steer clear of accounts that charge you for overdraft insurance, though. You shouldn’t have to pay for insurance against fees. Look for free checking accounts instead.
Related Article: 5 Ways to Prevent Debit Card Fraud
As we mentioned, the fraud protection on debit cards isn’t as comprehensive as the protection you have on your credit card. Here’s another reason not to rely exclusively on debit cards: If you report fraudulent purchases made with your debit card information, you may not recoup the lost funds. Instead, you may be asked to prove that you took adequate steps to protect your card and pin. This can be hard to prove to the satisfaction of your card provider. Plus, some card companies don’t return funds lost to fraudulent ATM transactions at all. Others won’t offer fraud protection to cardholders who are slow to report a problem. In most cases, customers have only two days to get in touch with the card company and report suspicious activity. Bottom line? In cases of fraud, debit card users have more financial liability than credit card users.
Related Article: Checking Account Dos and Don’ts
It’s easy to see that carrying a debit card carries some risks. Our advice? Use your debit card to withdraw cash as needed, but use the credit card for most other purchases, particularly online, where the risk of hacking is greater. If you’re worried about overspending, set up a budget. Then, go online and set up automatic credit card payments. As long as you pay your bills and keep your credit utilization to under 30% of your available credit, your credit score should be just fine. You might even get addicted to the credit card rewards.
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