Thursday, September 30, 2010

More about debit cards

Dave Ramsey is quite the champion of debit cards.  He doesn't want people using a credit card, even if they carry a zero balance, for the simple reason that most people will buy more with a credit card than they would with a debit card.  I'm pretty sure that's true of me; I'll be using cash whenever possible.  Here's what Dave has to say about debit card safety.  The print shows up small on my monitor; if it's too small for you to read, just do ctrl/+ until it's easy to read.

Think a credit card is safer to use than a debit card? Most people do. They convince themselves that credit cards carry a better track record, and you're less likely to have your money stolen from you when you use a credit card. Sadly, those people are wrong.

Credit cards carry a huge risk of allowing the user to incur debt. Debit cards force you to pay with money you already have. If you hold a debit card from a well-known name like Visa or MasterCard, it will have the same policy about unauthorized charges that credit cards have. Don't fool yourself into thinking that credit cards are the "safe" way to go. They'll only get you into trouble and force you to make payments.
Debit cards are being used at an all-time high today and are used more often than credit cards. Last year debit card use exceeded a trillion dollars. That's a lot of people using debit cards! Although we like to see the increase of debit cards versus credit cards, we still want to make sure you're being careful with your debit card.
Since a debit card is directly linked to your bank account, it's a convenient way to purchase things without incurring debt. When you use a debit card, the money is immediately withdrawn from your account, which means no interest, late fees, over-the-limit fees or annual fees—all good things to help you avoid debt. Debit cards are also great to use because they don't require you to carry cash or write a check.

Know your PIN.

When you make a purchase with your debit card, you should have the choice of running it as a debit or credit purchase. Always choose credit. Credit? Yes. This will insure that you are protected by the card company's zero-liability policy—you will not be responsible for unauthorized transactions. If you have to use your PIN, be sure to memorize your PIN and never carry it with you. Report lost cards immediately, change your PIN frequently, and use your debit card only if you must.

Check bank statements.

To insure that no one but you is using your debit card, check your bank statements online every day. It may seem tedious, but it's better than someone stealing your money. Be sure your internet connection and computer are secure before logging into your personal information. If you spot anything suspicious, call your bank immediately.

Watch your debit card.

Keep your eyes on your debit card when transactions are taking place. It should be within your sight at all times. Once the card leaves your view, anyone has access to your card information and ultimately your bank account. That's why it's always best to use cash!

Check your credit report.

Every year you can order a free credit report from each of the three nationwide consumer credit reporting companies (one per company so you really get three a year). Do it! If you think someone used your debit card, report it to the credit bureau immediately and request a copy of your credit report. Monitoring it regularly will help cut down on any illegal activities.

Be on the lookout.

The latest scam involves criminals attaching "skimmers" to card-swiping devices and gaining access to your personal information and bank account. If a card-swiper looks questionable, don't use it. Never use an unbranded ATM.

With all that being said, I will still be using a credit card online.  There is too much information out there saying you should not use debit cards for an Internet purchase.  I will only use the credit card, however, if I have the money in the bank; that way I can go online and pay it within a day or two, whenever it shows up on my account.  Of course, with many of my purchases I use Paypal, which comes directly out of my bank account.  That's ideal, because I am spending money that I actually have.  
To see why Dave doesn't want us using credit cards at all, click HERE.


  1. Jennifer8:10 AM

    Hey Donna,

    I only use a debit card and recently the card number and my personal info was stolen somehow online. The thief picked a long holiday weekend when the bank would be closed extra days and charged my card online each day maxing it to it's daily limit (even ordering a computer!) My bank is fantastic (very small town with only 2 locations) and as soon as we discovered it they returned all my money to my account and turned it over to the fraud department. I did have to get a new card but while I was filling out the paperwork I asked the bank pres (he was handling it) if all banks were this wonderful about this process. He said that all banks for the most part have to follow the same rules but where the biggest difference comes in is that my bank sets a mandatory daily card limit and other banks don't. Generally banks aren't ever closed more than 3 days in a row so they know that they will only have to cover $2250 in charges. He said that most of the big banks don't require that you have a daily spending limit so somebody could keep charging until your account was empty but the bank is only required to replace so much of your money immediately and you could wait months for the return of the rest of your money. So I decided debit cards aren't too risky as long as you have a maximum daily limit. ~Jen

  2. Lindie9:54 AM

    I have used a debit card exclusively for the past 3 or 4 years and so far, have not had a problem. My bank in Oak Grove has a small daily limit ($300) and really, I seem to use it mainly for gas and groceries. I put the receipts in my checkbook so I remember to write them down. I have used it a few times online also.

  3. Very very helpful information. Thanks so much for posting this.

  4. This is where Dave and Clark Howard differ. My professional experience shows you are far less likely to experience paralyzing effects of ID theft/account fraud if you use a credit card. A debit card can drain your account and many banks could care less if you have rent due, etc AND they can be argumentative about NSF charges that happen because the crooks overdraw your account.
    I understand where Ramsey is coming from - he's seen that the human animal is usually incapable of self-restraint and his advice is worth considering but as someone who sometimes took a dozen reports per week from people exhausted from dealing with debit card fraud, I think you're better off exerting as much personal control over the situation as possible AND THAT MEANS USING A CREDIT CARD.
    Ramsey's advice works really good for Nanny-state liberals who expect someone else to pick up the pieces after they broke the eggs.


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