Many people who cannot get approved for a regular credit card because bad credit may opt to use a prepaid debit card instead. While there are many advantages in using a debit card such as not having to pay interest rates and having more control with your spending, consumers need to be aware of the risks associated with debit card payments.
Apparently, there is a greater risk involved in paying with a debit card than there is in using a credit card. In this article, let’s discuss what these possible risks are along with some tips on how to safely use a debit card.
Limited liability protection. Credit cardholders usually enjoy a $50 liability protection on fraudulent transactions and there are some credit cards that even provide zero liability. With a debit card, you can get the $50 liability protection on unauthorized charges but only if you will report it within 2 days after the transaction was made. Beyond that time period, a debit cardholder may be required to pay up to $500 or pay the entire charge, whether it was made with or without the account owner’s consent.
More difficult to get refunds. In case there’s a problem with the purchase you made, it will be completely up to the seller if you will be given a refund or not. Remember that unlike credit cards that are paid at a later time, debit card purchases are instantly paid the moment you made the purchase. That means, the amount of purchase will be automatically deducted from your funds as the merchant ships out your order.
The problem with this arrangement is that the customer may receive a defective item or may not receive the item at all. Of course, customers can always dispute but since payment has been made, but if the merchant refuses to recognize your complaint, then you just lost your money.
To avoid being ripped-off, consumers are strongly advised to purchase only from reputable merchants, especially when purchasing online. Check the seller’s rating and track record of sales. What do past customers say about this seller? More importantly, understand the merchant’s policy on purchases, returns, refunds, warranty, etc.
Your funds can be placed on “hold”. Some establishments like hotels and car rental companies may place a “hold” on your funds aside from your bill. That means, your available cash in your debit account will be inaccessible to you for a specific time period. For instance, the hold may last until the last day of your stay or until you return the rented car.
While the amount on ”hold” will be returned to you, such “holds” may lead to overdraft charges, especially there is insufficient funds in your account. Therefore, be sure to inquire about the merchant’s policy on “holds” before using your debit card for payment.
The danger of identity theft. Technically, it is much easier to obtain debit card information and use them on unauthorized transactions without the cardholder’s knowledge. This is why debit cardholders need to be cautious.
To avoid serious damage, consumers are advised not to link their debit cards to their savings accounts. Therefore, in case identity thieves manage to steal their information, their bank accounts will not be drained. In addition, see to it that you are using a secured website and that your computer has an updated antivirus protection before paying with your debit card online.
About the Author
Tara Tiemann is a credit analyst for Go-prepaid.com which has been a resource site for people who want to live debt free. If you are on a budget using prepaid debit cards,prepaid credit cards and prepaid cell phone service can save you big money!
