While handy, debit cards need to used carefully: report
Using a debit card might seem like a better option than cash or credit, but there are a few risks involved, warns Consumer Reports in the April issue of its ShopSmart magazine.
“Debit cards are sneaky – they are extremely convenient but can get you into a lot of trouble if your information winds up in the wrong hands,” said Lisa Lee Freeman, editor-in-chief of ShopSmart. “Some simple precautions can save you a lot of trouble and protect you and your account from danger.”
Here are five common areas where things can go wrong, CR warns.
Don’t take your debit card on trips. Many credit cards come with some level of travel insurance and auto-rental insurance. They may also come with concierge services that could help you out in sticky situations.
Don’t use a debit card if you’re worried about getting ripped off. Your liability for fraudulent charges on a debit card can be greater than it is for a credit card. With a credit card, you’re only responsible for a small amout in unauthorized purchases. But with a debit card, you can lose up to $500 if you don’t report the theft or loss of your card or PIN within two business days of discovering the problem.
Don’t rely on a debit card if you want to raise your credit score. When you use debit cards, you’re not building a credit history. But well-managed credit cards can help boost scores.
Don’t use your debit card if you want to earn money on purchases. A recent federal law cut the amount that banks can make on debit-card transactions, so they scaled back their rewards. If you have a good cash-back or rewards credit card, use that instead.
Have you had debit card problems in the past? How were they resolved?
By Gordon Powers, MSN Money