Using a debit card for payments has become very common in recent years and an easy option for the times you’re not carrying cash with you. However, you need to be aware that paying with a debit card often comes with many risks.
“They’re good for routine transactions and certainly if you’re looking to keep your spending within limits, they do provide you a little bit better way to manage that,” says Leslie Tayne, a financial attorney and author of Life and Debt: A Fresh Approach Toward Achieving Financial Wellness. “But for major purchases, credit cards are usually a better way to go because they will offer you more protection.”
Nevertheless, the risk of using a debit card in certain situations can be greater than the convenience of using it. “I think it’s always a bad idea to use your debit card to make a purchase,” says Kimberly Palmer, the personal finance expert at NerdWallet. “The only reason you should use your debit card is to withdraw money from an ATM or a bank.”
Read on and find out 7 times you definitely shouldn’t use a debit card to make a payment. Moreover, by using a debit card, you’re often missing out on the rewards you could win if choosing to make a payment with a credit card.
You shouldn’t use your debit card when staying at a hotel
Debit cards are associated to bank accounts, so when you use a debit card when staying at a hotel, employees will put your card on hold for the amount of time you’re about to stay there. What this does, is affecting your ability to use your account for some other expenses you might have.
“That could definitely impact your ability to use the account for other expenses,” Tayne says.
You shouldn’t use your debit card when renting a car
The same goes for renting a car. By using your debit card to pay for a rental car, you won’t be able to use your account for other payments, as they will block those funds when using the vehicle, Tayne says. Of course, that might not be a problem for those who have plenty f money on their account, but for those who don’t, it could only lead to bounced checks and overdrafts.
You shouldn’t use your debit card when traveling abroad
When it comes to traveling abroad, it might be even riskier to pay for things by using your debit card. Tayne suggests using a separate debit card linked to an account that only has a limited amount of money. This way, in case your account gets hacked, you won’t lose all your money.
“In case it somehow gets hacked, it’s not tied to the majority of her money,” Tayne says. “Because a debit card does tie right into money, versus a credit card that doesn’t tie right into your usable cash.”
You shouldn’t use your debit card when shopping online
Certain websites are far from safe, so shopping there will only put you at risk even more. Moreover, if you end up being the victim of a fraudulent charge, it will be harder for you to follow your money when a debit card was used for the payment. That’s why it’s always better to opt for a credit card when shopping online.
“Even though banks still have protections in place for you with your debit card, a fraudster could empty out your bank account before you even realize that your debit card has been compromised,” Palmer says. “And that’s a huge risk for people because people use their bank accounts to pay for all kinds of things, from utility bills to mortgages and rent.”
You shouldn’t use your debit card when you want to earn points
“If you use a credit card, you can earn rewards on all your purchases,” Palmer says. “That’s not the case with a debit card.” Looking for earning points and rewards? Get a credit card that offers those perks and enjoy your shopping.
You shouldn’t use your debit card when you want to build your credit
Another reason to always make certain payments with your credit card, as debit card purchases don’t count toward your credit score. Additionally, making payments with a credit card and paying your balance every month will help you build your credit.
You shouldn’t use your debit card when you want to keep tabs on your budget
While everyone has a different opinion on this subject, the fact that you can see all your spendings in one place on your credit card makes it way easier to organize a budget.
“For me, it’s easy to analyze my statements instead of pulling out my bank account and trying to do it that way,” Palmer says.