Debit cards are being used more and more often by consumers for purchases than ever before. One possible reason is that people are trying to get a better handle on their credit and personal finances. But using a debit card does not always have the advantages that come with a standard or premium credit card.
Here are some key differences between debit cards and credit cards:
Less Room To Splurge
With a debit card, all funding comes directly from a bank account so consumers have no additional room to spend or cover overages unless they specifically have an overdraft protection backup source. If consumers find they are in need of emergency funds or if they want to spend a little bit more while shopping or on vacation, debit cards can be constraining.
Unlike standard credit cards, debit cards rarely offer additional incentives or rewards programs, like frequent flyer miles or cash back rewards programs.
Requires Inconvenient Security Holds
Debit cards are often viewed by larger companies as being a much riskier business than traditional credit cards. For instances where a consumer wants to make reservations at a hotel, purchase gas, or rent a car, a security hold is typically placed on the bank account connected to the card, which essentially freezes your money. In the event a consumer must cancel reservations, the total amount of the expected fees are still considered “on hold” by your bank and can remain in effect for more than a week until the final cancellation transaction has been completed and the funds are released. Money that is technically not owed to anyone can still be frozen for a period of time, making it inaccessible and inconvenient for the consumer.
Additional Trouble Renting Vehicles
Besides the aforementioned security hold issue, there is even more problems when it comes to using a debit card to rent a car. While many car rental agencies won’t even accept a debit card for payment, the companies that will take them often require customers to provide supplemental information such as utility bills, bank statements, and possibly even subject customers to a credit check before approving the car. Should a customer pass all of the requirements, a substantial security hold will still be placed on the card for the expected cost of the total bill.
One of the biggest differences between traditional credit cards and debit cards is the protection and security features a customer receives. Losing a debit card is the same thing as losing cash if a thief gains access to your bank account. They can clear the money out in an instant and it may not be traceable. All of your uncleared checks and automated bill payments that are set to clear the bank will be subjected to insufficient fund problems and the fees for overdrawn accounts can add up quickly and astronomically. In comparison, credit cards do offer liability protect, and the opportunity to fight the fraud effectively, in addition to the other security protections offered by the various credit card companies in the event of theft or fraud.
Obviously, the decision whether to use credit or debit cards is a personal one and dependent on one’s finances and lifestyle. However, in light of the potential hassles and risks, it may be beneficial to employ one traditional credit card for emergencies and times when debit cards are not so convenient.
Tisha Kulak is a writer for Creditorweb.com, where she writes about credit card offers personal finances, credit cards, and responsible credit card use.