Debit cards: Pros vs the Cons
In many ways, debit cards are very useful. For instance, a payday loan can be deposited into your bank account within hours of your online loan application being approved. Money is then yours to spend via a cash withdrawal, personal checks, or your debit card. During this recession, many have begun using the latter more and more instead of making credit card purchases. Some are already familiar with the convenience of plastic, but may not know the pros and cons of debit cards.
Pros of debit cards
Debit cards can hamper impulse spending. They can’t eliminate this problem, but their use can curb it to some extent. Unlike with credit cards, debit cards will only cover purchases when money is available to do so in the bank. A debit card is tied to cash, in that money is deducted (or debited) from your account after the transaction. Credit card spending has limits, and installment payments to pay off charges. A debit card does not offer this luxury. This means most people will think a bit more before spending more cash than they should and skewing their budget.
Merchants that don’t accept personal checks are more inclined to take debit cards for transactions. This makes carrying a debit card as convenient as a credit card in terms of the point of sale payment method. Today, many debit cards are referred to as Visa check cards and bear the Visa logo while others bear the Mastercard logo. This means that wherever MasterCard or Visa is accepted, debit cards with the logo is accepted there as well.
The cons of using a debit card
Cash advances or a line of credit is not offered to debit card holders, unlike what is offered with most major credit cards. Thus, if you need emergency cash or some fast cash for an emergency, or a buffer between paychecks, a debit card doesn’t help there. A person in this situation, even with bad credit, could look into a loan till payday or cash advance from a personal loan company.
Federal regulations, which protect credit card consumers, do not apply to debit cards. Once the money is debited from the account, contesting charges gets more and more difficult.
Also, banks that issue debit cards with checking accounts sometimes charge a fee when cards are used. While this practice is becoming more and more obsolete, consumers are advised to check with their individual bank before using debit cards and accruing possible fees. When inquiring about this, be sure to ask, specifically, about using the card to access cash at another banking institution or ATM machine. While some may not charge fees on purchases, it is still very common for banks to charge when a card is used at another institution or at a privately owned ATM machine.
A lost or stolen debit card can also be very costly depending upon what state you reside in and the time that the card is reported missing. While very limited protection may be offered, consumers should be aware of their level of protection ahead of time. For instance, if someone does not report their card missing within 48 hours of a thief taking it, it is possible for the original card holder to be left with some or all of the liability on purchases and cash withdrawals made by the thief. The amount of liability, of course, depends upon the banks policies and the state laws governing any such limits.
While debit cards definitely come with advantages, such as providing immediate access to cash advance or personal loan deposits, the drawbacks involved with using them can be costly if a person is not very careful. Overall, however, they offer freedom from high interest rates while offering many of the same conveniences as a credit card. Debit cards do not help build a persons credit, but they also do not present the risk of creating bad credit like some may have a tendency to do while using a credit card.
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