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Posted: 10:00 a.m. Thursday, Dec. 12, 2013

5 more places you should never use a debit card

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By Theo Thimou, Director of Content

ClarkHoward.com


Debit cards are a popular alternative to credit cards because they only allow you to spend what you have in your checking account. But they are rife with other dangers for your wallet.

Long called "piece of trash fake Visas and fake MasterCards" by Clark, debit cards are overwhelmingly inferior to credit cards for several reasons.

First, hotels, gas stations, and rental car companies will put a hold on your checking account if you use a debit card. If you have other checks floating around that someone tries to cash, that could throw you over into insufficient funds land and result in heavy fees. Plus, the company that runs your debit card may even do a hard inquiry on your credit without you knowing, which will lower your credit score!

Second, you have fewer consumer protections with debit cards. For example, let's say you notice fraudulent activity on your credit card. You have 60 days to report it and dispute the charge with your credit card company. But if you used a debit card, you have only 2 days to report it!

Several weeks ago, Clark published an article that listed 4 places you should never use a debit card. It was a wildly popular story on ClarkHoward.com, and we wanted to follow up with another 5 places for your consideration:

At the supermarket

A couple of years ago, Save Mart supermarkets were hit by criminal rings that put skimmers on the credit/debit card readers at self-check lanes in 20 Save Mart and Lucky branded locations throughout California. Very often, this particular kind of scam will be perpetrated by a crook dressed in the counterfeit uniform of the technology company that does regular routine maintenance on credit/debit card readers at a business!

At the car rental counter


Pamela Yip of The Dallas Morning News found that it's standard practice (and completely legal) in the industry for car rental companies to do a hard inquiry on your credit report, often without your knowledge or consent. They're trying to protect themselves against auto thieves that love to use debit cards as a low-risk method to get rentals that they can steal. But that inquiry can drastically lower your credit score in the process. The simple solution is to use a real credit card instead.

When booking advanced travel


If you have concerns about the solvency of a company you're buying future travel from, you're better off using a credit card. This holds true particularly during an economic downturn when leisure travel businesses like cruises and some airlines can go bust. Paying with credit card ensures you can do a chargeback if you don't get the travel you paid for.

While we're at it, have you considered trip insurance if you're taking a cruise, a tour, or traveling on a trip that requires pre-payment of thousands of dollars?

When buying furniture and major appliances


If you are ordering furniture or appliances and waiting on delivery, pay only by credit card. You reduce your risk if the store goes bust by doing that, which we saw a lot of during the housing slump when furniture and appliance retailers really took it on the chin. If you do not have your delivery within 50 days, put the credit card charge in dispute. You lose all right to any dispute after the 60th day.

When setting up automatic drafts


Auto drafts are a favorite way of utility companies, cable companies, health clubs, burglar alarm companies, and even mortgage lenders to get their money from you each month. But that business may continue to make monthly automated clearing house (ACH) debits from your account once your contract with them ends. That is illegal and you can get it to stop by citing what's called "Regulation E" and using Clark's sample letter to stop automatic payments.

But why open that can of worms to begin with?

For further reading:

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