Debit cards have been used commercially for three decades now but a surprising statistic was found in 2009. In that year, debit card use surpassed credit card use for the first time according to a study conducted by Javelin Strategy and Research, as reported by WIS. At first glance this may be a good thing, but there are matters unseen that make debit card use riskier than credit cards.
Loss or Theft. Card theft has been on the rise and the risk in losing a debit card is much greater for an individual compared to a credit card. With the loss or theft of a debit card, the thief would be spending your personal money at hand or in the bank. This gives the credence cleaning out your bank, unlike with a credit card where the money is not your very own but the bank’s being lent to you. Should you fail to report the loss of your debit card within two (2) business days, the thief may be able to spend as much as $500 on top of the contents of your account. With this, you may end up paying more than what you have plus interest and overdraft fees for the debit card.
Controlled Spending. This means imposing blocks or holds on your debit card account activity. This would be having a ceiling or control over the spending done through the use of the debit card, disallowing further transactions to be done on your debit card. The problem with this is that the block or hold may even result in you being unable to use the other funds in your account until the clearance for the block or hold is confirmed. An example would be purchasing for meals in a restaurant, since there is no confirmation as to the actual spent amount, a block or hold would be imposed at a certain amount and the hold can be lifted only after confirmation of the purchase amount by the bank.
Availability of Remedies. While the use of the debit card is very much the same as a credit card when purchasing through the Internet, there are limitations to the purchases made. With credit cards, you can have the transaction cancelled or put on hold until problems with your online purchase has been sorted out. If a debit card is used for an online transaction, since it signifies ready cash, then the amount of the purchase is automatically deducted from your account even if the purchase was anomalous. There is no available remedy to cancel a sale in this manner when a debit card is used.
Charged Fees. Fees and charges imposed on debit card use is much more frequent compared to a credit card. Depending upon the debit card stipulations you have agreed to, fees and charges can be imposed on the volume of use of your debit card, cash withdrawals from other banks other than your debit card bank and high penalty charges if the transactions done with the debit card exceed the deposited amount in the bank. There are many moves though to pull down the charges imposed upon debit and credit card use, such as the Dodd-Frank Financial Reform Act, the difference to the imposed amounts may eventually be passed on to the debit and credit card user.
Consumer Access. Credit card use is much more recognized throughout the globe compared to debit cards. This is most especially problematic for tourists, as car rental companies, hotels, restaurants or establishments only accept credit cards. The reason for such preference is the additional security provided the establishment to recover their costs, since a bank often foots the bill and charges the user. The debit cardholder’s access to funds is often limited, thus these establishments are wary of such transactions.
Credit Ratings. As the saying goes, use credit to get more credit. Thus, having a credit card and using it improves credit ratings for an individual. If the credit card user is responsible, then more credit would be made available to the individual. A debit card though does not have this facility, as it is the debit cardholder’s personal funds that are being used in the transactions and not a third party such as a bank’s credit and funds.
Thus in comparison, a credit card provides more security, benefit and access compared to a debit card. The debit card is limited in many ways especially when it comes to funds for transactions. The individual must be able to discern this and thus avoid the fine print in the use of debit cards.
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