Business Risks for Customers Using Debit Cards
- Customers should be careful when using debit cards to avoid financial risks.credit card terminal image by Igor Zhorov from Fotolia.com
Using a debit card is a popular method for purchasing items. When a customer swipes their debit card, a deduction is made from their checking account. Unlike a credit card, a customer cannot purchase items with a debit card if there is no money left in their bank account. This can cause many problems for a customer including overdraft fees. Even though debit cards may be convenient to use, customers using debit cards should be aware of the risks when using them. - The biggest risk for using debit cards is dealing with overdraft fees. Often, banks do not prevent a customer from making a purchase if they do not have sufficient funds to cover the purchase. If the customer is not careful, they may spend more money than they have and then later be fined with an overdraft fee. So a $4 coffee drink could essentially result in a $35 fee. This is risky for debit card customers who are not careful with managing their finances.
- Compared to debit cards, credit cards offer safer protection when dealing with unauthorized purchases or fraudulent transactions. Debit cards can be more of a hassle because money is drawn out directly from a bank account in real time and also it often takes many days for a bank account to dispute a unauthorized purchase or fraudulent transaction. Furthermore, if a fraudulent charge appears, your liability can be greater than that of a credit card. With a credit card, you are only responsible for up to $50 for unauthorized purchases. With a debit card, you can lose up to $500 if you don't report a theft or less within two business days of discovering the problem.
- If someone steals your credit card and uses it, you have the option of not paying for the charge. However, if someone steals your debit card and uses it, that money is taken out of your bank account in real time. The time it takes to investigate your fraud claim can take anywhere from many days to several weeks. This delay time can not only cause overdraft fees in your account, but can make it very difficult to pay your bills on time.
- When using credit cards for a hotel, they take an imprint of when you check in, but they don't charge your credit card until you check out. For debit cards however, most hotels hold onto funds that are more than the actual payment of your stay. This means they may charge your debit card more money in case of damages or incidental expenses are made like room service or telephone calls. Although they will take off this hold at the end of stay, it can be risky if your bank account happens to not have enough funds to cover these holds which can result in overdraft fees.
- It's best to use either cash or credit card when purchasing gas for your car. Sometimes gas stations will hold $50 to $100 on a debit card to your make a purchase for refueling your tank, even if you are only refueling your tank for $25. This can be risky if you don't have sufficient funds in your bank account which can lead to multiple overdraft fees.
