Debit cards have made it easy for us to access the funds in our savings or current account. ATM cards have exponentially enhanced our purchasing power, making it convenient to shop without carrying actual money in our wallets.
Understandably, many of us think twice before using our credit cards because there is a good chance of incurring debt. When it comes to debit cards, our attitude is the opposite because the money that is being spent comes from our own account. But you must exercise caution while using your ATM card too. For all the advantages that these cards offer, there are certain drawbacks that you need to keep in mind before you go overboard with your card.
You Don’t Have Comprehensive Protection against Fraud
One of the most attractive features of a debit card is the ability to make online purchases. We can buy items from across the globe without having to step out. But there are many fraudulent sites where you could lose money. Account cards do not offer significant protection against fraud.
If you notice an unauthorized transaction on your card, you can bring it to your bank’s attention. But the catch is that your bank can wait a certain amount of time before refunding the money to your account. The protection offered by banks for debit card fraud is far less comprehensive when compared to credit cards. The longer you wait to report a stolen card or an unauthorized transaction, the lesser protection you will receive from your bank.
You Could End Up Overshooting Your Budget
There is a better chance of controlling your expenses when you carry cash. The convenience of making payments with cards could make us careless with our purchases. Small transactions can pile up, leading you to overshoot your budget if you are not careful.
Going Into Overdraft
Some banks offer overdraft facilities where you can exceed the amount available in your savings account to make purchases. Although this seems like a convenient option during emergencies, it will impact your finances. Going into overdraft will result in a hefty transaction fee. In addition, you will have to pay interest on the amount you withdraw.
Another consequence of spending more than what is in your account is that your credit score could take a hit. Even though you cannot build your credit using a debit card, going into overdraft may have a negative impact on your rating. A low score will lower your chances of successfully applying for a loan or credit card.
You Might Have to Pay to Withdraw Cash
Most banks allow customers to withdraw cash from their own ATMs for free, but you might have to pay an additional fee if you use an ATM of another bank. The transaction fee varies from bank to bank. The fee can seem low for a one-off transaction but it can eat into your savings if you are not careful.
Withdrawal of money while traveling abroad is also subjected to an overseas withdrawal fee. For each purchase, you will have to pay a percentage of the transaction value. This means that the more you spend using your debit card, the higher will be the fee.
Not All Merchants Accept Debit Cards
You might not be able to make hotel reservations or book flight tickets using your ATM card. Many businesses prefer that their customers use a credit card over debit. The reason behind this is that hotels place a hold on your card to cover the balance of your stay. This is used as insurance if you fail to pay your bill.
If you choose to pay with your debit card, putting a hold on your account for the duration of your trip will mean that you won’t be able to access all your funds. The hold on your account could last until the payment for your stay has been processed, which could take up to a few weeks. You will have to make sure that you carry a higher balance in your account to be able to pay for other expenses.
It is always safer to make big-ticket purchases using your credit card. Not only wilhaveve greater protection against fraud, you will not be putting your savings at risk.
Even though debit cards come with certain disadvantages, it does not mean that you overlook their advantages. Ease of making payments and safety are two of the biggest highlights of a debit card that you cannot ignore. Many cards now offer cashback and other benefits to help you make the most out of each transaction. You could benefit from comparing different debit cards offered by banks on comparison websites and choose one that rewards you the most. Before you make a purchase, compare the pros and cons of using your ATM or credit card. This way you can make the most of both your cards.