Debit cards were introduced about a decade ago. They were advertised as an alternative to credit cards being that they were linked to your checking account rather than an interest seeking bank. But there are some downsides to using debit cards of which we should all be aware.
Somehow we have transferred our credit card mentality to the debit card. Swipe, swipe, swipe–we just keep swiping with no regard for our balance at times. This is similar to the trouble we get into with credit cards, only it is directly affecting our immediate bottom line. We won’t have up to 30 days to correct it.
What about the mortgage payment? It’s sitting in that same account we are swiping from. If we aren’t careful we can easily spend our rent, electric and insurance bill money while out shopping. It’s a dangerous endeavor to integrate your spending money with your bill money in that way. It is best to take into account your bills, and just withdraw a set amount of cash that you can spend in the course of a shopping day.
Possibility of Overdraft
When you use a debit card to purchase gas, it automatically takes a $1 hold which can stay on your account for days. If you are not one for details, you can forget this important piece of information and think that there is a higher balance available than you really have. You write a check, or make another purchase thinking you’re cool, but then you check your account one day and that $1 hold has turned into the $50 gas purchase you actually made–your account is now overdrawn.
The fees associated with overdraft have skyrocketed. Some banks will charge you anywhere from $30-40 for each overdraft item that hits your account, and allow items to keep coming in even after your balance is negative. You can end up with hundreds of dollars in fees over a small purchase.
Telling People Your Pin
In the days of checks, banks could tell immediately if someone had fraudulently taken money from your checking account by comparing signatures. They would then refund your money for their mistake with no further questions.
But with debit cards, all that you need is a PIN (Personal Identification Number). If you have trusted someone, maybe a family member, a lover, or an employee with your secret PIN number they can take money right out of your account using your debit card without your knowledge, and without anyone challenging them.
Then, the theft is also hard to prove to your bank. If the person was unauthorized to use your debit card, why did you let them know the PIN? The bank loses money if they have to cover the cost of a withdrawal your friend or family member made while using your PIN. They will most likely make you take the fall.
While debit cards are convenient, useful, and innovative in many ways, they are also dangerous in other ways. It is important to minimize your use of the card, watch your account on a regular basis, and keep your debit card PIN completely private to protect your money.