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    Personal Finance: Debit Card Pitfalls

    Geo Beats

    by Geo Beats

    Personal Finance: Debit Card Pitfalls - as part of the expert series by GeoBeats. Hi, my name is Carol Friedhoff, and I am with Savvy Outcomes. Many people are concerned about using their debit cards. Is it a good thing? Or is it ok? And the challenge is that many people are worried about their credit cards because there has been so much concern about getting into credit card debt. So debit cards have been great because you are using your money from your checking account rather than incurring additional debt. However, there is a difference between how credit cards are legislated versus the debit cards. And you may have more protection with a credit card than with a debit card. A credit card is covered by the fair Credit Card Billing, which reduces some of the exposure to fraudulent activity as well as protection when you make major purchases as far as making sure that if there is not good quality that you have some protection. So when looking at using the debit card, just may need to keep some of that in mind. May want to use the credit card for larger purchases, and be careful when you are making or canceling a debit card transaction because it is being treated like a checking account instead of like a credit card. With a checking account the money is taken out of your account right away, where with a credit card you have a thirty day rolling cycle. So, if there is a cancellation, there is time to get it caught up and get it off your account whereas, with a debit card, you are better to treat it as a return rather than a cancellation. Because, when you do the debit, it puts a hold on your account for that amount, so if you actually return and get a credit for the canceled amount, you are better off. And you also need to look at what is your liability. If you end up, somebody stealing or you lose your card, you maybe have a higher liability with a debit card than with a credit card. But the best rule of thumb with both of them is to cancel it as soon as you find out it happens. So that will reduce your liability. The final thing is, here, recently, there have been some fraudulent activity at retail stores. In other words, if you go and use your debit card, they swipe the card, you put in your PIN, and somebody is sitting outside the store and captures that information. They can then begin using that to make purchases. So a good rule of thumb is, when you use your debit card at a retail store, use it as a credit card. You can say, “This is a credit card.” Do not use your PIN, and then you are better protected.