Debit cards are useful financial tools as they offer the convenience of plastic – without the risk of racking up debt. Just like Credit cards, though, Debit cards can lead to trouble if not used wisely. Here are experts’ nine best tips for managing your debit card, according to CreditCards.com.
Know yourself: Do you have bad money habits, such as not balancing your chequebook, losing receipts and getting hit with overdraft charges? If so, avoid pulling out your debit card every time you crave a latte, and pay cash for everyday purchases. “The debit card is a great tool, but it’s not for everyone,” says Susan Tiffany, director of consumer periodicals for the Credit Union National Association. “Just ask yourself upfront: ‘Am I the kind of person who’s going to run into trouble with this?’”
Keep track of transactions: Keep good records to avoid bounced cheques, overdraft fees and stress. “Write down every purchase right away in your cheque register,” says Gail Cunningham, spokeswoman for the National Foundation for Credit Counseling. This goes double for those who have joint accounts, according to Catherine Williams, vice president of financial literacy for Money Management International, a national credit counseling firm. “It’s really important that you both record all your transactions and be in close communication with each other,” Williams says.
Don’t automatically opt in: Leslie Parrish, a senior researcher at the Center for Responsible Lending, says 80 per cent of consumers would rather have their card declined at the checkout counter than get hit with more overdraft fee. “Your debit card could become your most expensive credit card if you don’t have enough money in your account and are extended credit,” Parrish says. Instead of opting in, Linda Sherry, national priorities director for Consumer Action, recommends you set up your own overdraft protection by linking your card to a savings account or a line of credit.
Watch out for holds: Before using your debit card to make hotel reservations, rent a car or even buy gas, ask whether any holds will be placed on your account – and how much and how long those funds will be held. If you don’t want your money tied up for what could be as long as a month, consider using a credit card for hotels and rentals instead, Tiffany recommends. (Or, make the reservation with a credit card and pay the final bill with your debit card.) “If you’re traveling and don’t have the balance to cover the holds they’ve placed, you could go to buy dinner and have your card declined,” Tiffany says.
Know the difference – debit versus credit: You’ve just swiped your card to pay for a new pair of jeans, and the clerk asks, “Debit or credit?” If you choose “debit” and punch in your PIN, the transaction happens online and is processed right away. If you choose “credit” and sign instead, the transaction may hit your account several days later, leaving you to think you have more money in your account when you don’t.
Be smart about choosing a PIN number: Try to choose a random combination of numbers that you can remember easily, and avoid choosing a PIN that a criminal could guess, such as your initials, your kid’s birthday, the last four digits of your special number or numbers in sequence, recommends Greg Meyer, community relations manager for Meriwest Credit Union. “You wouldn’t believe the number of people who want to choose 0000 or 1111,” Meyer says. “That’s just asking, ‘Please rip me off.’”
Go online daily to check your account: Stay on top of every transaction to find out right away about unexpected fees or holds, accidental double charges or fraud. This is especially important with debit cards because any money you lose is your own – not the bank’s, says Tom Harkins, chief strategy officer for Secure Identity Systems and former vice president of security and risk for MasterCard International. By federal law, your losses from fraudulent activity on your debit card are limited – but only if you notify your bank within two days of noticing a problem.