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March 14, 2022

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 use your debit card for big purchases or when you shop online. Unlike debit cards, credit cards may add a year to manufacturer warranties. What’s more, if you buy something online that’s defective or damaged during shipping, you can dispute the charge and ask your credit card company to intervene. You could be giving up some of that leverage by going the debit route.

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.

If you want a few real-life horror stories, check these case studies from The Ombudsman for Banking Services and Investments.

Have you had debit card problems in the past? How were they resolved?

By Gordon Powers, MSN Money



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Gordon PowersGordon Powers

A long-time fund company executive, Gordon Powers now heads up the Affinity Group, a financial services consulting firm. Gordon was a personal finance columnist for the Globe & Mail for many years, has taught retirement planning...

Jason BucklandJason Buckland

The modern-day MC Hammer of money, Jason can often be seen spending cash that isn’t his with the efficiency of a Wilt Chamberlain first date. After cutting his teeth as a reporter for the Toronto Sun, he joined the MSN Money team with...