Many people who cannot get approved for a regular credit card because of 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 using a debit card.
As you know, here at go-prepaid.com, we love using prepaid services. We all have debit cards that we use regularly. But in recent years, scam artist have been targeting prepaid debit cards. Here are some things to look out for and tips to help you keep your debit card safe.
Phone scams and prepaid debit cards. More and more scam artist are utilizing prepaid debit cards to carry out phone scams. Why? Because once the money leaves the account its hard to trace who took it and there is no way for you to get your money back. These scams include pretending to be police officers, utility personnel, and basically someone in a position of authority calling you to tell you that you have to pay them using a debit card only. Fishy right? But people are falling for it all over the US. I read an interesting article here called, “Why scam artist like prepaid debit cards”
Limited liability protection. With a credit card you have built in protections to help you avoid losing money to scam artist and the banks take on a lot of the risk. If your credit card gets stolen, most banks will cover your loses. With a debit card, that won’t happen. If you give your debit card number to a scammer and they take your money, that’s it. The debit card company will not be refunding you any of the money lost.
Unscrupulous Merchants. 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. 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.
If there is a problem, the debit card issuer will not credit the amount back to your card while you dispute the charge. If the merchant will not issue a refund of defective items, then you are out of luck.
Although, if you have a debit card issued from your bank (like Citibank, Chase or an institution along those lines) that is tied to your checking account the protections afforded that checking account will extend to your debit card.
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.
Money on hold. Your funds can be placed on “hold”. Some establishments like hotels and car rental companies may place a “hold” on your funds that is larger than the bill you owe. That means, your available cash in your debit account will be inaccessible to you for a specific time period. Be aware that some holding periods extend past the day you check out or return the car. Make sure you know how much will be put on hold and when that money will be release.
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!