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The Pros & Cons of Using Debit Cards

Learn how to protect yourself from debit card fraud.

By
Laura Adams, MBA
5-minute read
Episode #82

Cons of Using a Debit Card

On the flip side, here are the disadvantages of using a debit card over other payment methods:

1. Disputed charges can be more difficult to resolve. Since money was spent out of your account at the moment of purchase, you have more risk with a debit card than with a credit card if the item is defective, misrepresented, or never gets delivered to you.

2. Some banks may charge you extra fees. There could be monthly service charges, over-limit fees, per transaction costs, or penalties for dropping below a minimum required balance that result from using a debit card.

3. You don't improve your credit score. Building up your credit score is an important consideration for your financial future. Paying bills, such as credit card payments, on time is the most effective way to increase your rating or to maintain a high credit score.

4. You can't take advantage of reward points. One of my favorite reasons for using a credit card when making any large purchase is the opportunity to get travel reward points. There are many different types of cards that offer a variety of great incentives, and I have an entire episode devoted to rewards credit cards to prove it.

5. It gives you lower levels of fraud protection. If a thief gets your Personal Identification Number, they could easily empty your bank account. Fraud certainly happens with credit card use as well. However, most credit card companies put a hold an any account that shows unusual activity.

6. And lastly, your potential liability for misuse is unlimited. This contrasts the low risk that comes from misuse or theft of a credit card.

The United States Federal Trade Commission established two acts to address the issue of lost or stolen cards. The FTC website address is ftc.gov. The Federal Reserve Board also has information about credit protection laws on their site at federalreserve.gov. I'll be sure to include a link to all this information in the show notes, at quickanddirtytips.com.

Credit Card Fraud--You Are Protected

According to the Fair Credit Billing Act, your maximum liability for unauthorized use of your credit card is just $50. If your card was stolen, and you report the theft before any misuse occurs, your liability is $0! If you have the card in your possession, but someone stole your credit card number, your liability is still $0.

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About the Author

Laura Adams, MBA

Laura Adams received an MBA from the University of Florida. She's an award-winning personal finance author, speaker, and consumer advocate who is a frequent, trusted source for the national media. Money-Smart Solopreneur: A Personal Finance System for Freelancers, Entrepreneurs, and Side-Hustlers is her newest title. Laura's previous book, Debt-Free Blueprint: How to Get Out of Debt and Build a Financial Life You Love, was an Amazon #1 New Release. Do you have a money question? Call the Money Girl listener line at 302-364-0308. Your question could be featured on the show.