Most consumers carry debit or credit cards. The question is which one is the best to use? Take a look at what debit cards do not offer and then decide.
Protection Against Fraudulent Use
Debit cards don't offer as much protection against fraudulent use as credit cards do. While debit cards are offering more protection than they did in the past, the exact protection can vary from one card to another. This is especially true if a debit card has been taken and is not been reported as stolen in a timely manner. It's important to contact your bank to find out exactly what protection you have and what you are liable for in the event of fraud occurring.
If there is a dispute regarding a purchase you make, you are in a weaker position when you use a debit card vs. a credit card. This is because the merchant already has your money when a debit card is used; this is not the case with a credit card. That means that while the dispute is taking place, your money will remain with the merchant and will only be returned if the dispute is mutually settled in your favor at the end
Using money out of your personal account when making a purchase with a debit card can have a huge effect when fraud or disputes occur. While the fraud or dispute may eventually be ruled in your favor, the time it takes to resolve the problem means you will not have that money in your account. This can cause other transactions to default, forcing you to pay substantial fees. If a default occurs, this can trigger universal default from the credit rating services, and the problem can continue to cascade from there.
While some debit cards are beginning to offer rewards, they are still far fewer and less valuable than those rewards that credit cards offer.
Money Taken Instantly
When you use a debit card, the money is immediately taken out of your banking account. With a credit card, there is a float period between the time you make the purchase and the date the credit card bill is due. This means that you earn a little bit of extra interest on your money when you use a credit card vs. a debit card.
No Added Services
Credit cards often come with added benefits, such as extended warranties on products purchased and insurance for rental cars and airline travel. Debit cards do not offer these services, and that means you will have to pay extra for them if you want them.
When using a debit card, it can be difficult to keep track of what you purchased if you aren't diligent in writing down everything. Making a mistake on the balance can cause you to think you have more in the account than you really do, and that can ultimately result in accidental overdrafts
Banks May Not Provide Current Account Information
Unfortunately, banks aren't always helpful when it comes to figuring out how much you have in your account. Some banks report your balance from the ATM when you use your debit card as what you have in the bank, plus courtesy overdraft, leading you to believe you have more in your account than you really do. This can cause you to spend more than is in the account and rack up overdraft fees
Transactions and payments made through your debit card are not reported to the credit agencies like they are with credit cards, meaning that your good habits don't help you build your credit score. With credit scores now carrying greater importance in many personal finance areas, building this good credit is becoming more and more important.
Not Always Accepted
Using a debit card as a deposit on a rental car or a hotel room is not always possible. In the cases where it is possible, often the vendor will freeze a portion of the money in the account, and this can cause problems for other payments. Even when this money is returned, it can take up to a week to return to your account. This means that even when you believe you have money, it may not be available for use, and this can cause you to exceed your limits and incur fees
In addition, BBB provides the five following transactions that could cause the most damage when using a debit card:
Online Shopping: Websites, e-retailers and other online service providers may be trustworthy and well-intentioned, but there are other potential risks, such as: shared wireless networks, unsecure Internet connections, data breaches, company impostors, hackers and other online schemers. There is significant anonymity on the Web so review companies carefully, read privacy policies and make sure sites are secure before releasing payment information.
ATM Cash: Scammers tamper with automatic teller machines and card terminals by inserting skimming devices on card readers and installing miniature spy cameras. Only use monitored ATMs in well-lit areas near trusted banks and busy shopping centers. Avoid using machines with askew card slots and keypads.
Gas: Card skimmers also meddle with unattended pay-at-the-pump gas station terminals; low-traffic highway rest stops can be particularly vulnerable.
Dining and Drinking: Restaurants, food delivery services and bars sometimes keep customer payment information on file, hold cards for tabs or process payments behind closed doors. Once cards are out of sight, they are at risk of falling into the wrong hands; cards can get overcharged or copied and used without permission.
Down Payments and Deposits: Companies that sell expensive merchandise may offer programs or allow consumers to reserve goods with deposits. It is best to charge pre-payments and pricey purchases on credit cards, in case businesses close unexpectedly or orders are not fulfilled.