Many of us try hard not to use our credit cards. As a result, we tend to use our debit cards frequently.
Many debit cards carry either a Visa or Mastercard logo, which allows you to use the card as either a debit card or a credit card. No matter which option you choose, the money is withdrawn from your bank account immediately, so from a financial standpoint, it really does not matter which option you choose.
Merchants such as Walmart, often try very hard to get you to choose the debit option. The reason for this is that the merchant pays a smaller fee to their bank or payment processor for each transaction if you choose the debit option over the credit option. For large transactions, this difference can be significant to the store, because if you choose the credit option, the store pays a percentage of the transaction amount. If you chose debit, the store pays a flat fee, no matter the size of the transaction.
HOWEVER, from your perspective as a consumer, if the store that you shop at and use your card as a debit card is hacked – and that seems to be all too common these days – the bad guys can duplicate your debit card and with your pin, can empty your bank account.
Most banks allow you to limit the amount of withdrawals that are permitted on a daily basis to reduce your exposure. Many banks also will send you a text message, in real time, every time your debit card is used – including atm withdrawals – so you will know instantly if your card is being used. If you get a text message and you didn’t use your card, call your bank immediately to shut down the card.
So, even though some stores cajole you to use your card as a debit card, I recommend that, for your own financial safety, you shouldn’t do it.
There was an item on the news tonight here in Denver that some RTD (the local transit agency) ticket kiosks were compromised with skimming devices and some users had ATM withdrawals made from their bank accounts afterwards. Had they used the card as a credit card, the skimmer operator would not have had their ATM PIN and would not have been able to withdraw cash from their bank account.