Another Reason To Avoid Debit Cards

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There are plenty of reasons you should use a credit card instead of a debit card (if both are available) but here’s one that is especially compelling. A debit card is directly linked to your checking account, whereas a credit card is linked to an ephemeral credit limit. When Burger King accidentally bills you $2,243 instead of $22.43 or when they bill you $8,648 instead of $86.48, you aren’t suddenly emptied of all your funds.

Debit cards used to suffer from weaker fraud protection, that’s no longer the case. Debit cards used to be less widely accepted because they used a network that differed from credit cards, that’s less and less the case. However, debit cards will always be linked to your bank account (that’s by definition) so when someone accidentally enters in $2000 instead of $20, you’ll be out that money until someone is around to resolve it.

In the meanwhile, any checks you’ve written or any future debit transactions will result in NSF (not sufficient funds) and overdraft fees – which will likely put a smile on your bank’s face and a huge frown on yours.

So, if you want yet another reason not to use debit cards, this is a big one. Don’t underestimate the power of carelessness and stupidity.

{ 20 comments, please add your thoughts now! }

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20 Responses to “Another Reason To Avoid Debit Cards”

  1. Posco says:

    On the other hand, the point-of-sale terminal SHOULD tell you how much is being debited BEFORE you swipe. Consumer: pay attention!

    But, yeah, I don’t use my debit card except as an ATM card at branch ATMs.

  2. Ditto what Posco said. I always check my debit card receipt before I leave and keep an eye on it until the transaction clears my bank.

  3. jim says:

    Posco: That is an excellent point but mistakes happen. Of all the transactions that occur every single day, it’s amazing so few of these errors result.

    You all know that I’m all for personal accountability but sometimes things slip through the cracks… why not prevent the problem in the first place? (I am, of course, preaching to the choir)

  4. RacerX says:

    Great points, but it is far more likely that you will charge more then you can payoff in a month (at least most are this way) then one of the other issues coming up.

    If that is tha case then you are paying interest on a Whopper 🙂

  5. Hazzard says:

    We use what I’d call a “firewall” with our debit card. We maintain 4 accounts at our credit union. One has an ATM (with no visa/mc logo) and is tied to our main checking where we keep most of our money and also mapped to savings.

    The second card is a debit card (with logo) and is tied to a checking acct that we only keep $500 in at a time. If someone gets our debit card number, the only damage they can do is what’s in the smaller checking acct.

    Since we have such great access to our accts online, it’s easy for me to keep track of how much money is in the acct to avoid overdrafting. This system has worked well for us for a few years.

    All that being said, I only use my debit card for “in person” purchases and always double check the receipt. I don’t use it at restaurants and never use it online. (We have one credit card that we use for those purchases)

  6. I think many people use debit cards so that they will not overspend on their plastic. But credit cards are always better because

    1. you build credit with proper use of it.
    2. You’ll always need one for booking hotels and stuff over the phone.
    3. you can earn rewards or cash rebates.

    I have set up an automatic full payment from my bank account that pays off my credit card bills every month. That way, I can make sure I never owe the credit card companies anything.

    • AGC says:

      Suppose on the 2nd to last day of the month Burger King charges your CC $3000 for a Whopper, which your automatic full payment service deducts from your bank account the next day. Now suppose you only find out after checks start to bounce. Would the CC protect your bank account even in such an event as that?

  7. conedude13 says:

    I was once charged twice at a store once while i was on a tight budget. I only saw the one receipt though, so i had no idea until i saw it on the bank’s site the next day. And, like the law says, when bad things can happen… I bounced a couple of things due to the duplicate charge. However, I did call up the bank after the duplicate charge was removed and the NSF charges were removed. Sometimes banks can be nice! 😛

  8. Minimum Wage says:

    I’d sue.

  9. Amanda says:

    This is a great point and I’d never really thought about it before. Sometimes I’ve found myself at Subway or something and used my debit card to pay… I guess I’ll be whipping out the Mastercard instead going forward!

  10. adfecto says:

    I use both depending on how late it is in the month… 🙁

  11. Kari says:

    Debit cards are indeed directly linked to your bank account. But, if you’re not careful, using your credit card and not staying on top of can get you in a lot of trouble. If you’re looking for a way to feel secure that your bank account won’t be affected when the cashier at local grocer isn’t paying attention, get a reloadable prepaid debit card like the UPside Visa card. This way, you can load funds from you checking account or even your credit card and if a mistake does occur, your entire world won’t collapse. As well, it provides Visa’s Zero Liability Policy, so if the grocer isn’t willing to refund you, you’re not at risk.

  12. Cully P says:

    Agree on most points here. Personally, I believe there are pitfalls to both, especially with all of the phishers and scams out there. What I tend to do is pay mostly with my credit card (because I use a rewards card), and then pay it off with a check later. The debit card I may use infrequently for smaller purchases–but yes, if the wrong amount is charged, there’s not much you can do with that unless you spotcheck every purchase.

  13. Laura says:

    Has anyone ever heard of CASH? I use my debit/credit card tied to my checking account as a credit card for online bill payments and online purchases only. If I am out buying something in person, I use CASH. That way I cannot spend more than I have, and will not incure OD charges. If I want something bad enough and I don’t have enough cash, I will write a check. Not as easy to do these days of plastic, but that is what is good about it. It makes you more aware of what your spending and less apt to forget to “write it in”.

  14. GeekMan says:

    I’m a big believer in controlled and smart use of credit cards, so I agree with what was written. One thing I always ask those who tout the greatness of debit cards is, “If you’re so worried about overspending, why not just get a pre-paid card instead?” With a pre-paid card you’re basically doing the same thing as using a debit card except you won’t EVER have to worry about insufficient funds or overdraft charges.

    Me? I’ll stick to using my credit cards wisely by never spending more than I earn, paying off the balance each month and reaping the cashback rewards.

  15. prashant says:

    i am new to all these.

    i am having debit card…. and like you know many site ask to use credit card to pay…….
    but i dont have credit card 🙁
    can i use my debit card for those payment.
    and my debit card is of chinese currency RMB(YUAN)……. but on site they ask for USD. can i still use it.
    any suggestion are welcomed.

  16. Sylver says:

    OK, so most of the European banking community has paperless bank accounts. Where our checking account used to be we now have a debit card account. Works the same way a checking account worked without the paper checks. We do still have to keep track of our purchases and deposits just like anyone else with common sense would do. You do have to have an income in order to have a debit card, the account can be overdrawn and if it is you’ll pay the same fines for overdrawing that you would if you overdrew your checking account. Not everyone can overdraw. Not having the overdraw privilege implies that your credit standing is probably precarious. You do have to have a good credit rating in order to gain this “privilege”. Even if you don’t use your overdraw privilege it indicates to other banks that you will probably have a positive credit standing with your home bank. It’s a case for not abusing your “privileges”.

    • Gold says:

      I have found just the opposite- BOTH banks we use automatically have you signed up for the overdraft “privilege” and you have to “opt out” if you do NOT want it. There is always a fee for that service. I had that “privilege” and a deposited check that ran into red tape through no fault of my own, so all my tiny debits the next few days cleared with the OD coverage but there are FEES for that “over draft privilege”; a tube of $2 toothpaste then cost $24, a 2/$1 candy bar offer cost $23, you get the idea. Had I NOT had the OD coverage, those debits would have been declined at the POS. The bank has WEEKS to tell you a check deposit didn’t clear, but you OD coverage continues no matter how small the debit TA is. So, I had no clue I did not have a balance. I found out at my next deposit. It resulted in enough overdraft fees that when I went to deposit a 1K plus payroll check, I was in the NEGETIVE. Not to mention what can happen to your debit if it is lost or stolen and you have that “over draft privilege? on it! The ONLY way OD coverage would possibly be worth having would be if, for example, you paid a mortgage payment that had a $60 late fee. By your bank clearing that payment for the $22 over draft fee, you saved $38 and also your credit rating. Banks make money on offering you overdraft privileges (they made $44 on me in just the toothpaste and candy bar transaction examples I gave; the total was over 1K!!!!!!, so they don’t care about your credit rating!

  17. Lilian says:

    The problem is when banks have a visa or mastercard logo and the consumer believes that the card has the same protection like a visa or mastercard until you learn the lesson.

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