The ins and outs of debit cards |
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So when it comes to fraud it's important to realize that you don't
have the same legal protections with a debit card as you do with
a credit card.
Tougher returns
You may also have a trouble getting a refund on poor-quality or
damaged merchandise purchased with a debit card.
Because many merchants treat a debit card purchase as they would
a personal check or cash, you may get stuck with several hundred
dollars in store credit instead of a refund.
When you make a purchase with a credit card, you
have the option of withholding payment should you be unsatisfied
with the quality of an item. This right is protected under the Fair
Credit Billing Act. This federal law does not apply to debit card
purchases.
As long as you have your receipt, you may have a case under a
state's unfair trade practices law. But pursuing that course could
prove costly and time-consuming.
So as a dissatisfied debit card customer you're pretty much stuck
trying to resolve the dispute with a merchant on your own. It could
go on for weeks or months and when it's all said and done you may
not get your money back.
When to use a debit card
So it's a good idea not to use a debit card to pay for big-ticket
items or expensive services.
When the car breaks down while you're out on vacation, it's best
to reach for a credit card, not a debit card.
"Yikes, I'd never put a car repair on a highway
on a debit card," Garman says. "Because you want to have
the power of the Fair Credit Billing Act behind you."
It's also a good idea to use credit cards when ordering merchandise
from the Internet or a catalog. With a credit card purchase you
have the law on your side if something should go wrong. Make an
order with a debit card and you're on your own.
"I would encourage people to use a credit
card for purchases for future delivery because your rights are stronger,"
Grant says. "You could get nothing or nothing like you were
promised."
Debit cards are a great way to pay for everyday items such as
gas or groceries. A debit card can also be a good money management
tool if you're diligent about recording every single transaction
in your checkbook.
"You know how much you've got and you
only spend what you have," Garman says.
Now that you know how a debit card works and understand the risks,
you can better decide if and how often you'd like to pay by debit.
"If you use a debit card, use it with
your eyes open," says Steve Rhode, founder of Myvesta.org,
formerly Debt Counselors of America.
"Realize it's like an electronic check
and every time you hand it to someone you're giving them access
to your checking account."
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