Using a debit card has become one of the most convenient ways to pay for purchases. Everything from a cup of coffee to gas – the debit card has replaced the use of cash. In many cases, the debit card has replaced the use of checks when paying bills. However, before you use your debit card for all of your purchases, you should be aware of the hidden dangers of using your debit card.
Fraudulent Charges
Unlike a credit card, getting your money back for fraudulent charges on your debit card takes more than a simple phone call to your bank. When a credit card is used without the permission of the card holder, the charge is reversed on the card. This is done by a phone call to the credit card company and you may need to fill out a form verifying you didn’t make the charge.
However, when someone uses your debit card fraudulently, you could be out the money until the investigation is complete. This could mean weeks without your cash which can put you behind on paying bills or buying necessities.
If you do not catch the fraudulent charges in time, you could overdraw your bank account thus leaving you with overdraft charges. The liability to you for a fraudulent transaction is limited by federal law to $50 however; you only have two days to report the theft. If you don’t check your statement every couple of days, you could be stuck paying for someone else’s shopping spree.
Disputing Purchases
If you receive a faulty product that you have purchased, it is easy to dispute the charges with a credit card. When ordering online, you can stop a credit card payment should the item arrive damaged or if the item doesn’t arrive at all. This is not the case with a debit card. When you make a purchase with your debit card, the amount is automatically deducted from your account. Should a dispute arise from your purchase, it is usually too late for any action to be taken with your bank.
Phantom Charges
Also known as a “hold on funds”, phantom charges are placed on debit cards until the amount of the purchase is charged on the debit card by the merchant. When you use your debit card at the gas pump, a phantom charge is put on your account that averages $75. This phantom charge is placed on your account until the correct amount is put through your bank by the merchant.
This same scenario can occur if using your debit card at a hotel. When using a credit card for hotel accommodations, the card usually isn’t charged for the bill until you check out. With a debit card, a hotel will put a hold on funds for the amount of the room and for incidentals that you might charge during your stay like a bar tab or meals. Rental car companies are also known to charge phantom charges when using a debit card.
You will get the money back for these phantom charges once the actual amount has been charged by the merchant. Like fraudulent charges, phantom charges can lead to overdraft charges by your bank. You can protect yourself by not using your debit card when your balance is low for purchases that may require phantom charges. When purchasing gas, go inside and pay for your fuel for the exact amount rather than paying at the pump. Hotels and rentals are best paid with a credit card.
Thieves
Skimming machines are becoming one of the quickest ways for thieves to drain your bank account. Miniature skimming machines are placed at ATM machines where the debit card’s magnetic code is “skimmed”. Some of these devices have a small camera at the ATM to record your PIN number. The thieves then make a card with your information and use the information to drain your account.
Skimming doesn’t always occur at ATM’s and not always to debit cards. Anytime you hand over your credit or debit card to a merchant, you risk the chance of your card being skimmed. The most popular places for thieves to skim a card are at restaurants or other businesses that take your card from your sight to charge the card.
To protect yourself from overdraft charges, fraudulent charges, and loss of money, use your debit card wisely. Never hand your debit card over to a stranger and be familiar with the ATM machines you frequent. Using a debit card is convenient but there are still times when a credit card or even cash is the safest way to pay for your purchases.