Debit cards are useful for many reasons. They can provide a great deal of convenience, help you maintain a budget, and cost you a pretty penny when you overdraft your account. Wait, what? OK, maybe debit cards have their downsides, too.
I’ve had both positive and negative experiences with my debit card. On the bright side, I no longer have to carry cash. However, it hasn’t always been helpful. For instance, after eating dinner one night, I handed the waitress my debit card to pay for my meal. A few minutes later, she returned and informed me my card had been declined. How could this be when I knew for a fact I had more than enough money in my account to cover the bill? I’ll get to this a bit later.
There certainly are advantages to having a debit card. On the other hand, there are disadvantages, too. I’ll explain some of the pros and cons below.
Here are some of the advantages of using a debit card:
I hate carrying cash. If it doesn’t end up falling out of my money clip, I end up spending it on something I don’t need, like fast food. With a debit card, there’s no need to carry cash or a checkbook. All it takes is one swipe of the card and you’re good to go.
On the off chance you need cash, you also have the option of opting for “cash back” at most stores or using your debit card as an ATM card to withdraw money.
When you use a debit card, you can’t be talked into purchasing something you can’t afford because your spending limit is the amount of money you have in the account. This helps prevent you from piling up debt and having to pay interest in the future.
Easy to get
At most banks and credit unions, you have the option to have a debit card linked to your account without completing a lengthy application like you would for a credit card. Unlike a credit card (where you’re asking to borrow money), you’re just asking for access to your account via a debit card. There’s no borrowing involved, making the process a smooth one.
Here are some disadvantages of using a debit card:
It doesn’t build credit
There are many ways to improve your credit score, though maintaining a debit card isn’t one. While paying your credit card bill on time is an effective way to build credit, you don’t get the same advantages with a debit card.
Some banks charge monthly service fees, overdraft fees and per transaction costs. It doesn’t make a whole lot of sense to pay to use your own money, does it? Always be sure to read the fine print and check with your bank or credit union about possible fees.
Low level of fraud protection
If someone gets ahold of your personal identification number (PIN), the money in your bank account could disappear quickly. Some of you might argue the same could happen if a credit card was stolen, although most credit card companies put a hold on an account that shows unusual activity. At worst, you could be responsible for $50 if your credit card was stolen. For debit cards, it depends on when you report your card as lost. The longer you wait, the more you’ll be responsible for.
For those of you sitting on the edge of your seats waiting for me to tell the story of my declined debit card, the time has come. Earlier in the day, I put $100 into my checking account. After doing so, I filled up my gas tank (about $50) and took my brother out to lunch. That left me with about $30 to spend for dinner, right? Wrong. After getting the embarrassing news about my debit card, I called the card issuer to complain. Before getting the opportunity to do so, the customer service agent informed me that some merchants such as hotels, car rental agencies, and you guessed it – gas stations – put a hold on certain transactions to protect against fraud. In my case, the gas station put a hold of $50 on my account, which explains why my card was declined.
Now that I’ve outlined some of the pros and cons of using a debit card, I want to hear your stories. Do you think debit cards provide more convenience or hassle? Let us know in the comments section below!