As banks and other financial institutions continue to push for more paperless transactions, debit card usage will increase. While convenient, debit cards lack some of the security features of paper checks and can expose cardholders to substantial financial risk. Debit card users can limit some of this risk by protecting their personal banking information and carefully considering the security risks associated with certain types of retailers.
While most online retailers employ security measures to protect customer data, the potential for theft, fraud and misuse is much higher than with in-person transactions.
When making a major, large-ticket purchase, such as appliances, jewelry, electronics or furniture, a debit card may not provide the same purchase protection as a credit card. Many credit cards offer to extend manufacturer warranties and can help with refunds or return of purchases.
Depending on the company, a gas station may place a hold on some amount of funds to cover your purchase. Although this hold is released when the actual purchase amount is processed, it may take several days to process. This practice can tie up funds in your checking account and result in refused payments or overdraft fees.
Using a debit card to pay reoccurring debt will result in some amount deducted from your account, regardless of other pending debts. In the event you forget about the impending deduction, make calculation errors in your balance or miss a deposit, reoccurring debit card payments can result in overdraft issues or returned payments.
Use of a debit card at any ATM can expose cardholders to fraud, theft or misuse. Talented thieves can alter legitimate ATM's to record information to be used for illegal purposes or to steal cards. Avoid using a debit card at any ATM location that seems odd or doesn't provide a comfortable environment.
To Pay a Deposit
As with gas stations, using a debit card to pay a deposit can tie up checking account funds for some length of time. Using a credit card to pay a deposit can free up funds for purchases and, depending on the card issuer, offer some purchase protection.
When making a first-time transaction, either in-person or on-line, consider using a credit card, rather than a debit card. This will allow you to evaluate how the merchant processes the transaction, the quality of the merchandise or service and how they handle issues without exposing your checking account balance to unnecessary risk.
Using a debit card at a restaurant can offer some opportunity for misuse or fraud. In addition to taking the card out of your sight to be processed, restaurants typically request approval for an amount in excess of your actual purchase. This is to cover any anticipated tip you might leave, in addition to the billed amount. You may not be aware of this additional hold, which could present problems for future purchases.
Advance Travel Purchases
Using a debit card to pay for advance travel purchases, such as airline tickets, hotel reservations or tours, can tie up money in advance of your trip. Using a credit card can feel up checking account balances for other purchases and, in some cases, provide travel protection during your trip.
Paying for merchandise or services in advance can be risky debit card usage. If the purchase never arrives, recovering advance payments may be a difficult task.