Though I try to use a credit card as much as possible when buying stuff — online or offline — I still have a debit card for certain uses.
A credit card has many benefits and added security (as it's not linked directly to your checking account). I really don't know why anyone would want to use a debit card in the 21st century, but I know a lot of people still do.
The benefits of using a credit card
If your credit card is stolen, skimmed or compromised in any other way, the harm is minimal. You report it stolen, or report false charges, and it's not your problem anymore.
A debit card is far less secure, as any false transactions will lead to money being deducted directly from your checking account, and getting it back can be a really time consuming. On a credit card these charges will be added to your bill (often a monthly one), but in the meantime you can dispute the charges, and as long as your report the charges or a stolen card in due time, and you haven't used the card irresponsibly (like keeping the digits on a note in your wallet) you will be fine!
Who want's to have checks bouncing because of false charges? You will get the money back — eventually — but it may take months, and in the meantime you will have problems paying your bills.
I'm not going to spend this article trying to convince you to use a credit card (but please, get one!). Instead, I'll show you where you should never use your debit card.
Never use your debit card to:
Pay at the pump
Skimmers are one of the dangers when paying at the pump, like anywhere else. Like with independent ATMs, which we'll address below, it's relatively simple and quick for criminals to tap the card payment module on gas stations with a skimming device.
Many gas stations will also put a large hold on your card, which can be held for days. With a credit card it doesn't matter if they hold an amount, as it's not your money being held, and the charge (which is released in a few days), won't cost you anything.
A held, or frozen, amount on your debit card might cause checks to bounce, and there is no way to free it up, except for waiting it out.
Pay for services or products online
If you use a debit card to pay online, you have no security at all. With a credit card you have an extra added layer of security: If you don't get the merchandise, you can do a charge-back within a certain time span (usually 60 days).
If your credit card details are stolen, maybe due to lack of security from the payment processor, a trojan or computer, or any other way, the card is not linked to your checking account.
At the supermarket
Your debit card information isn't safe even at the supermarkets. A few years ago, a criminal ring hacked Save Mart's supermarkets by putting a skimming device on their card terminals at 20 locations in California.
Skimming devices, if they are installed correctly, can be extremely hard to detect.
When renting a car
Many people are shocked when their checks and card bounces after renting a car. It's a normal, and completely legal practice, to put a charge of up to several hundred dollars on your card. Even a hard charge — without your consent!
Normally, a charge like this is done as a deposit, in case of damage or auto theft. If you use a credit card, this charge won't cause any trouble.
With a debit card, this may, and probably will, cause a hard charge on your card statement. This can drastically affect your credit score!
Debit cards have been used as a easy solution for criminals stealing rental cars, causing the rental companies to step up their game and do hard charges on the cards.
Alderman, a Carrollton, Texas, engineering technician, said his dispute with Avis Rent A Car System LLC started last November while he was on vacation in Hawaii.
He reserved and paid in advance for a rental car from Avis as part of a vacation package.
When he went to pick up the car, Avis wanted a credit card to secure the deposit — the deductible for the first $250 that insurance didn't cover in case of catastrophic loss or damage.
Instead of using a credit card, Alderman handed over his debit card, expecting that Avis would reserve $250 on his bank account and then release the hold when he returned the car. He said he had more than $1,000 in his account at the time.
”But when they swiped my card, instead of reserving money from the bank account they actually pulled a credit report completely without my knowledge or consent,” Alderman said.
When booking advanced travels (i.e. hotels and flights)
When booking travels you should always use a credit card. Imagine if the company your booking via gets insolvent (bankruptcy). You will probably never get the money back, as other creditors like banks and loan providers will have the right to any money left before you and other customers.
Airline and cruise liners have gone bankrupt earlier — so I can't see why it won't happen again.
When buying expensive products like furniture and electronics
For the same reason as above, if you buy expensive furniture or electronics that you have to wait to get delivered, you have no safety net should be company become insolvent.
This has happened, and we saw a lot of furniture and appliances retailers went bust during the last housing crisis.
Also, when using a credit card, if your items aren't delivered within 45 days, open a dispute. If you don't dispute the charge within 60 days, you will lose the opportunity to dispute the charge, and 45 days should give you some leeway.
Cash withdrawals from independent ATMs
Independent ATMs, those you find in stores or malls, are the all-time skimmers favorite. These are less secure than the bank ATMs as they're not as frequently monitored, and often lack security cameras.
For criminals it will be easy to install a card skimming device on an independent ATM, it can be done it minutes, and most people won't notice.
At restaurants and bars
Treat your debit card like cash. Don't leave it in the bar, and make sure you hide your digits and that you can see the amount of the charge.
Fraud with credit cards does occur too, but as a customer you have much more rights and security should the card be compromised.
If you still insist on using a debit card after reading this, well then make sure you put the card on a separate account at least — and don't tell me I didn't warn you!
Featured photo by Neill Turner, CC and Thomas Hawk, CC