Thrifthy Thinking: Debit Cards

Using a debit card may seem like the best choice when you don’t want to use cash or a credit card to make a purchase. However, the latest issue of ShopSmart identifies five scenarios that can put consumers at risk when using their debit cards. The April 2012 issue of ShopSmart magazine, from the publisher of Consumer Reports also features five ways consumers can protect themselves from common debit card dangers.

“Debit cards are sneaky – they are extremely convenient but can get you into a lot of trouble if your information winds up in the wrong hands,” said Lisa Lee Freeman, editor-in-chief of ShopSmart. “Some simple precautions can save you a lot of trouble and protect you and your account from danger.”

Five Debit Card Don’ts to Help You Avoid Trouble

1. Don’t use your debit card for big purchases or when you shop online. Unlike debit cards, credit cards may add a year to manufacturer warranties. What’s more, if you buy something online that’s defective or damaged during shipping, you can dispute the charge and ask your credit card company to intervene. You might miss that leverage with debit cards.
2. Don’t take your debit card on trips. Many credit cards come with some level of travel insurance and auto-rental insurance. They may also come with concierge services that could help you out in sticky situations.
3. Don’t use a debit card if you’re worried about getting ripped off. Under federal law, your liability for fraudulent charges on a debit card can be greater than it is for a credit card. With a credit card, you’re only responsible for up to $50 in unauthorized purchases. But with a debit card, you can lose up to $500 if you don’t report the theft or loss of your card or PIN within two business days of discovering the problem.
4. Don’t rely on a debit card if you want to raise your credit score. When you use debit cards, you’re not building a credit history. But well-managed credit cards can help boost scores.
5. Don’t use your debit card if you want to earn money on purchases. A recent federal law cut the amount that banks can make on debit-card transactions, so they scaled back their rewards. If you have a good cash-back or rewards credit card, use that instead.

Five Ways to Protect Yourself Against Debit Card Dangers

· Save receipts and check them against your monthly statement. Make sure all the charges are correct and there are no errors on the statement or any unauthorized charges.
· Don’t use a PIN that is too obvious, like your date of birth, and change it regularly.
· Sign up for online banking if you haven’t yet so that you can check your account often.
· Reduce your risk of ATM “skimming,” in which a device electronically swipes your data and PIN. Use machines at banks rather than in convenience stores, airports, gas stations, or any isolated locations, which can be riskier.
· Use your debit card to make purchases only with trusted merchants, and don’t give your card number to anyone you don’t know over the phone or by e-mail.

About Consumer Reports :

Consumer Reports is the world’s largest independent product-testing organization. Using its more than 50 labs, auto test center, and survey research center, the nonprofit rates thousands of products and services annually. Founded in 1936, Consumer Reports has over 8 million subscribers to its magazine, website, and other publications. Its advocacy division, Consumers Union, works for health reform, food and product safety, financial reform, and other consumer issues in Washington, D.C., the states, and in the marketplace.

About ShopSmart magazine:

Launched in Fall 2006 by Consumer Reports , ShopSmart draws upon the publication’s celebrated tradition of accepting no advertisements and providing unbiased product reviews. ShopSmart features product reviews, shopping tips on how to get the most out of products and “best of the best” lists. It’s ideal for busy shoppers who place a premium on time. ShopSmart has a newsstand price of $4.99 and is available nationwide at major retailers including Barnes & Noble, Wal-Mart, Borders, Kroger, Safeway and Publix. ShopSmart is available by subscription at www.ShopSmartmag.org.