4 Debit Card Tips That Minimize Spending Risks
Debit cards offer a convenient way to access the money in your bank account, but they do come with some risks. Here are some things you should know about using your debit card.
One of the most convenient things about debit cards are that you can use them to get cash. The most common way to do this is at an automatic teller machine. However, most banks charge fees to use an ATM. And even if your bank doesn’t, you still will have to pay a fee to the bank that owns the ATM if you are not using one of your own bank’s machines. Keep in mind, too, that depending on your bank and the type of account you have, you might be limited in how many times each month you can use an ATM to get cash.
Using the card for purchases
Another convenient thing about a debit card is that you can use it like a credit card for most purchases. However, you don’t have the same protections when making those purchases. Some banks will not insure you or refund your money for fraudulent purchases made with your debit card, something most credit card companies will do. You also may not be able to use your debit card as a credit card everywhere. For example, many hotels and rental car companies require a credit card and won’t accept a debit card.
Another issue with debit cards is that certain purchases can trigger a hold on the account for a certain amount of money. For example, gas stations often put a hold of $50 or $75 on debit card gas purchases, even if you don’t spend that much. This ensures there will be enough money in the account to cover the purchase, but it can also prevent you from making other debit card purchases if you don’t have a lot of money in the account.
Lack of rewards
Even the best debit cards usually don’t offer reward programs such as cash back or airline miles, like many credit cards do. If you can afford to pay off your bill every month, it makes more sense to use a credit card and reap rewards rather than use your debit card. If a debit card does offer cash back, it’s usually only for signature-based purchases.
PIN- vs. Signature-based purchases
Most merchants allow you to choose whether you want to punch in your personal identification number or sign when using a debit card. If you punch in your PIN, the money will be deducted from your account right away. If you choose to sign, the transaction might not be processed for a few days, which can be dangerous if you don’t keep tight track of how much you are spending.