Why Using a Debit Card is Riskier Than a Credit Card

A debit card can be a very handy tool when you’re out and about.  They don’t charge the interest that a credit card does and they allow you to avoid the hassles of dealing with personal checks.  They do have an element of risk to them, however, and you need to be aware of it.

Identity Theft

One of the dangers of a debit card is that it’s attached directly to your bank account.  An identity thief who gets a hold of your credit card number, for instance, can rack up charges, but the charges don’t come directly out of the money you use to live.  Identity thieves have become increasingly sophisticated in their ways of getting money from debit cards, and this means that they could drain your bank account in minutes, leaving you with no money at all.

Hidden Fees

If you rent a car or another service on your debit card, the company will sometimes place a hold on your card against other charges that they have reason to believe that you will incur.  This may mean that you lose access to a substantial part of your bank account until the service is resolved and the hold removed.

Overdrafts

In some cases, a debit card will deny a transaction if you’re over your bank account’s total worth and in some cases they will not.  In those latter cases, you may end up with a hefty overdraft fee attached to your account. 

When this happens, you may find yourself in a situation where you end up paying hundreds of dollars for “overdraft protection”.  You may want to opt out of this service, if you have it.  It’s better to have the debit card declined than to pay $35 for $5 worth of gas or some other minor charge.

Bad Deals

There are those times when you’ll make a payment on an item with your debit card and then turn out to not be satisfied with the purchase or to have been completely ripped off.  Unfortunately, if you paid by debit card, the amount of the purchase comes out of your account immediately.  With a credit card, you can always stop payment.  With most online payment services, there is some way of preventing someone from ripping you off through a dispute system. 

With debit cards, you’ll oftentimes find yourself having to get that money back from the merchant since they’ve been paid already, which can be very tough to do.

In Summary

A debit card can be convenient, but when you’re traveling or making purchases at retail stores, you may want to consider using your credit card instead.  Remember that the ability to run a debit transaction as a credit card transaction doesn’t magically transform one card into the other.  It simply means that your debit card is being accepted over a system that processes credit cards.  Your debit card is still charged in the regular way with all the risk that it entails.

Debit cards are certainly a big step up from checks, but they do come with some of their own drawbacks, as well.