Almost any time you open a checking account, the bank will issue a debit card to you. While you may think of this as the ATM card to draw money out of your account, it can be used for so much more. While utilizing this card is convenient, there are some things that you should know to make sure you are using it properly—and not costing yourself money because of it.
1. ATM fees will cost you.
While you probably have free access to the ATMs that are a part of your banks network, you will find that using your debit card to access cash at an ATM outside of that network will come with some hefty fees. If you know that you will need cash, plan ahead and get the cash out at your bank’s ATM so you don’t get stuck running to the nearest ATM—and paying a premium to do so.
2. Debit transaction fees can also add up fast.
Some banks will give you a certain number of debit transactions that you can use within a certain month and then there are fees associated with additional debit transactions. Do the research and make sure you understand your banks rules and fees connected to debit card usage.
3. Immediate removal of funds from your account.
Even though it may look like a credit card—and probably can be used as credit—it is a bit different. When you use your debit cards, funds are almost immediately removed from your account. Don’t expect a lag time when making a transaction—even though you get paid in a few days, that money may not be in the account in time to cover a transaction that you are making today. It is extremely important to keep track of your account balance so you don’t overdraw.
4. Debit can be used as credit.
Perhaps you didn’t think that it made a difference as to how you use this card… think again. The way the transaction goes through can make a huge difference. If using the card as debit, you will have to enter your PIN (personal identification number) to complete the transaction. If using as credit, you will have to sign, just as you would any other credit card. A debit card transaction goes through—and removes funds from your account almost immediately; whereas, a credit card transaction can take up to three days to process.
5. Security issues.
Even though your debit cards have a PIN, if your card becomes lost or stolen, and the thief learns your PIN, they will have immediate access to your money. Make sure that when you enter your PIN at any transaction terminal, you don’t let others around you see what you are entering.
6. Checks from the account can be processed as debit.
You may not realize that some of the checks that you write from your account are now also processed as a debit transaction. If you are sending the check in the mail, you may have a few days of lag time, but if you write a check for an office co-pay at the doctor’s office, for example, and they process your check as a debit transaction, it will go through immediately—and, money will be taken out of your account the very same day.
7. Get cash back.
When you are using your debit card to pay for groceries or other household items, many retailers will give you the option of getting cash back. Because it is a debit card, you do have access to your funds immediately, so this is a great way to get cash out—without worrying about ATM transaction fees.
8. Liability for fraudulent purchases.
This is where debit can get a bit risky. When you use your card as debit, you are personally liable for the transactions—because it requires a PIN and allows immediate access to your account. So if your card is lost or stolen, you may not have much protection from fraudulent charges. Although some banks do offer protection if you notify the bank immediately. Typically, if the card is fraudulently used as a credit card, you will have liability protection.
9. Issues with dispute of charges.
If you have used your debit card to purchase goods or services and then there is a dispute, you may not be able to get your money back. Once funds have cleared your account, there may not be a way to get them back. For instances, when making purchases online, you may want to opt for paying with credit so the transaction is protected.
10. Pay your taxes with debit.
You may have never thought to pay your taxes with your debit card, but it is an option. Many people write out a check and send in with their return if they owe one, but just as you can submit your return electronically now, you can also pay any taxes you owe electronically now. It is important to note that there are transaction fees for doing so. And again, make sure you have the funds in your account when making this type of debit transaction. Bouncing a “check” to the government isn’t a mistake that you probably want to make.
You debit card comes with a lot of convenience. It is a great way to pay “cash” for everything, but still have a record of each transaction. This is a nice way to see where your money is going each and every month—and it is impossible to over-spend. Once your money is gone, you won’t be able to make any more transactions—unlike an actual credit card, which won’t cut you off until you have maxed it out. However, knowing the pitfalls of debit can keep you from incurring additional fees or risk for fraudulent purchases.
Audrey Henderson is a Chicagoland-based writer and researcher. She holds advanced degrees in sociology and law from Northwestern University. Her writing specialties are sustainable development in the built environment, policy related to arts and popular culture, socially and ecologically responsible travel, civic tech and personal finance.