Dangers of Using Your Debit Card as a Credit Card

July 8, 2019

DEBIT CARDS are convenient. They help people better manage their spending since the money they are spending comes directly from their checking accounts.

Debit cards are especially popular among millennials. because they are convenient and often they don't yet qualify for credit.

A survey by Bankrate.com found that 63% of Americans aged 18 to 29 don't have a credit card. And a 2014 CreditCards.com survey found that same age group used debit cards three times more often than credit cards when making purchases under $5.

But, what makes debit cards so appealing is also what makes them riskier than credit cards.

The credit card scenario

One day you notice $560.78 in charges you didn't make on your credit card statement. Your card has been compromised even though you still have it in your possession.

You call your credit card provider, who will ask a few questions before temporarily removing those questionable charges from your card and start an investigation. They'll also cancel your card and mail a new one.

After the probe shows the charges weren't yours, you won't be held liable and life goes on.

Debit card drawbacks

Unlike the fraudulent credit card charges, $560.78 in debit card purchases would draw real money from your bank account.

That's money that you can't use to make your house payment, buy groceries or utility payments.

The problem for you is that there's no guarantee that your money will ever be replaced - especially if you wait too long to report the fraud.

According to federal law, you are only liable for $50 in fraudulent charges using your debit card if you tell your bank within two days of the fraudulent transaction.

If you wait longer than that but less than 60 days, you can be holding the bag for $500 in losses.

Anything after 60 days, and the bank is under no obligation to cover the losses at all.

Even if the bank decides to put the money back in your account, it won't happen the same day.

The bank has up to 10 days to investigate. Under federal law, if it does find that the transaction was fraudulent, the bank must replace funds within one business day of coming to that conclusion.

Best protection

  1. Use credit cards. Banks are required to remove charges if found to be fraudulent.
  2. Check your account often. Check your bank account online daily - or at least once or twice a week - to identify problems early.
  3. Learn your bank's debit card liability policy. Find out if your bank will replace fraudulently acquired funds within 48 hours of reporting the problem. If it makes you wait until the investigation is complete consider opening an  unconnected "rainy day" account.

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