When IBM developed the first Automated Teller Machine for Lloyds Bank in 1972, only a few would have predicted that it would change the way in which we go about carrying out transactions. Today, debit cards have become an indispensable part of our daily lives replacing the conventional methods of transaction like cash and checks. However, experts feel that consumers should be a little cautious while using their debit cards as it can make one more vulnerable to frauds and phishing attacks. The Consumer Federation of America has also clearly stated that the use of debit cards should be avoided while shopping online and while making hotel reservations or paying up at gas-stations. Let us check out the places where it is better to avoid using a debit card.
Most consumer safety groups are unanimous in putting online shopping as one of the high-risk places for using a debit card. The most important reason for this is the amount of time it takes to settle any disputes that may arise from the transaction. Besides, using a debit card for online transactions puts a consumer under increased threat as debit cards are mostly linked with a checking account. Also, as per Federal Regulations, there is a maximum liability of $50 on a customer in case of fraud and theft, provided the customer has used a credit card to place the order, whereas there is no such assistance in case of a debit card. Apart from the security benefits, using a credit card entitles a consumer to reward points and a good credit score; benefits which a debit card does not provide. Using a debit card deduces the entire charge of a product at one go, which can create hassles in case of a dispute. For example, if you buy a television set worth $300 by using your debit card, the amount will be deducted from your checking account at one go, and in case you later change your mind or find the product to be defective, it will be your responsibility to settle it with the concerned retailer. Credit card gives you the advantage that the charge does not show up on your statement till the next month, and in case of a dispute, your bank will get in touch with the retailer to address the issue.
Gas Stations and Hotels
The widespread use of skimmer machines has persuaded many people to either use cash or a credit card at gas-stations and hotels. In fact, there has been a splurge in the instances of frauds at gas-stations. A skimmer machine captures the confidential details of a debit card, which can lead to a precarious situation as a fraudster gets a direct access to your checking account. Apart from the fraudulent activities, 'holds' and 'block-offs' are a major cause of concern as it can lead to financial complications. A 'hold' or a 'block-off' allows a merchant to block a higher amount so that they are assured that they would be paid-in-full when the final amount payable is uncertain. For example, if you drive to a gas-station and intend to buy $30 worth of gas, there is a likelihood that the gas company will block an additional $20 from your bank-account. Although this extra charge is reversed but you will need to wait a minimum of 72 hours to get your money back. Similarly, while making hotel reservations, a hold may be placed on your account to ensure that the hotel gets the required amount before a final bill is created. Therefore, it is always advisable to use a credit card at gas-stations and while making hotel reservations. If you still want to use your debit card at gas-stations, it is safer to use your PIN to ensure that you just pay for what you have purchased. While making hotel reservations, it is better to ask the representative about any over-draft charges, and if you are still not really sure, using a credit card is a better option.
If you are buying something really expensive, consider handing out cash to the retailer. If you haven't got enough dough in the bank and want to pay up when you get some, try using your credit card. The problem with using your debit card again is the hassle involved in settling a dispute in case of any ambiguity. Credit cards also give you extended warranties than a debit card besides offering you better reward points.
While signing up for anything that requires an automatic periodic deduction, it is advisable to give out your credit card details. The simple reason for this again is the ease of settling a dispute with a merchant, as the Federal laws are more favorable towards transactions made via credit cards. Also, with a credit card, you just incur a debt, which you have to pay, and in case of an unauthorized deduction you can very well contest the debt. However, with a debit card, it is altogether a different ballgame as the money has already been taken from your checking account, and you have to do the needful to get it deposited back into your bank account, which may possibly, and usually, take a lot of time.
These were some of the occasions where using a debit card should be avoided. Although many people are wary of using a credit card for buying stuff and paying bills, courtesy the high interest rates, financial discipline can very well ensure that you never fall into bad debt. Using a credit card can be a good alternative to debit cards, provided you pay up on time. It will do a little good to your credit score as well. However, it is not as if you should restrain from using your debit card altogether, as it has its own benefits and scores over a check or a credit card in some parameters. We hope that the above mentioned information would have given you an insight into the scenarios where you should avoid using a debit card.