10 places NOT to use a debit card

Sometimes reaching for your wallet is like a multiple-choice test: how do you really want to pay?

While credit and debit cards may look almost the same, not all types of plastic are the same.

“It’s important that consumers understand the difference between a debit card and a credit card,” says John Breyo, vice president of public policy, telecommunications and fraud for the National Consumer League. “There is a difference in how transactions are processed and in the protection offered to consumers when they use them.”

With debit and credit cards, each payment method has its own advantages, and each is better suited for certain situations.

Here are 10 places and situations where it can be beneficial to leave that debit card in your wallet:

10 places NOT to use debit cards

1. Online shopping

“You don’t use a debit card online,” says Susan Tiffany, former director of consumer periodicals at the National Association of Credit Unions. Since the debit card is directly linked to a checking account, “you have a potential vulnerability” if you have a problem with a purchase or the card number is stolen.

For the same reason, Linda Foley, who founded the Identity Theft Resource Center in 1999, suggests not using a debit card for phone orders.

Federal Reserve Regulation E (commonly referred to as Reg E) applies to debit card transfers. It sets the consumer liable for fraudulent purchases at $50, provided that the buyer notifies the bank within two days of discovering that the card or card number has been stolen.

Most banks have additional voluntary rules that set their customers’ debit card liability at $0, says Nessa Feddis, vice president and senior legal counsel Association of American Bankers.

But protection measures do not save consumers from the hassle. The prospect of trying to get money back into your bank account, and the problems that a lower-than-expected balance can cause in terms of fees and check or payment rejections, has some online shoppers reaching for their credit cards first.

2. Expensive goods

Paying by credit card is more reasonable for high-value items, says Chi Chi Wu, staff attorney at the National Consumer Advocacy Center.

Why? A credit card gives you the right to dispute if something goes wrong with a product or purchase. “With a debit card, you have less protection,” she says.

In addition, some credit card benefits include extended warranties. And in some situations, such as when renting a car, credit cards can also offer additional insurance in the event of an accident.

There are two caveats with credit cards. Don’t hold the balance or you risk paying high interest, Wu says. And “avoid store cards with deferred interest.”

3. When is a deposit required?

When Peter Garuccio rented home improvement equipment from a major store, a significant deposit was required. “It’s better to use a credit card instead of a debit card here,” says Garuccio, a former spokesman for the American Bankers Association.

With a credit card, the store has a deposit and you still have access to all the money in your bank account. With luck, you’ll never have to part with a dollar.

4. Restaurants

The next time you dine out, stop and think about what might happen if you hand over your debit card when the check arrives.

“During those few minutes when you’re out of sight of your debit card, it can easily be passed through an illegal handheld reader,” says Barry Bridges, former writer and editor of The Simple Dollar and Bankrate. “The card is then returned to you and you are blissfully unaware that your information has been compromised.”

Of course, this identity theft scenario is also possible with a credit card. The difference is that debit cards provide much less protection against unauthorized transactions than credit cards, mainly because the money is withdrawn directly from your bank account.

Luckily, some restaurants in the US are following Europe’s lead and introducing table payment systems in which waiters bring you a restaurant card reader.

Until this technology hits your favorite restaurant, pay with a credit card, not a debit card. “You don’t eliminate risk, but you use a payment method that makes it much easier to take action to eliminate unauthorized charges,” says Bridges.

5. If you are a new client

If it’s your first time shopping in a store (online or in a brick-and-mortar store), don’t use a debit card for your first purchases, Brejo says.

In this way, you will get an idea of ​​how the business works, how you are treated and the quality of the goods before handing over the card that is linked to your checking account.

6. Buy now, get delivery later

Buying now but getting delivery days or weeks later? A credit card offers contesting rights that a debit card typically does not have.

“It can be clothes you are familiar with and trust, but something can go wrong,” says Breyo, “and you need protection.”

Keep in mind that some credit cards limit protection to a certain period of time, Feddis says. Therefore, resolve any problems as soon as possible.

7. For recurring payments

We’ve all heard of the gym that won’t stop charging a former member’s credit card. Now imagine that payments do not go to your card, but come directly from your bank account.

Another reason not to use a debit card for recurring payments? Your own memory and mathematical ability. Forget budgeting for that one-month automatic bill payment and you could face either a fee or an embarrassment (depending on whether you’ve allowed an overdraft or not).

So if you don’t keep a cash buffer in your account, “to protect yourself from over-the-limit fees, you might want to consider using a credit card” for recurring payments, Breyo says.

8. For future travel

Book your ride with a debit card and “they’ll charge it immediately,” Foley says. So if you buy a ride that you won’t use within six months, or book tickets weeks in advance, you will immediately lose that money. Booking on credit allows you to pay off the balance over time if necessary for a high-priced trip.

Another factor that worries Foley is that hotels are not immune to hackers and data breaches, and several well-known establishments have suffered from this problem in the past. Do you want your debit card information to “lay in the system for four months, waiting for you to arrive?” she asks. “I would not.”

9. Hotels and holds

Some hotels will block your card to cover any incidental charges or charges that are not immediately shown on your itemized bill. Sometimes they withhold deposits of hundreds of dollars to make sure you don’t empty the minibar and trash the room.

The hold is almost invisible if you use credit, but can be problematic if you use a debit card and have enough funds in your account to cover what you need. It’s a good idea to ask about deposits and deductions before presenting a card, according to Feddis.

Some fueling companies also place reserves on the accounts. This means that even if you only bought $10 worth of gas, you could have $50 to $100 worth of temporary bank hold, Tiffany says, although that practice is not as common today.

10. ATMs and gas stations

A possible hold is not the only reason to pause before using a debit card at gas stations. Criminals are getting better at camouflaging skimmers and making them harder to spot in places like self-service pumps at gas stations, says Kara Gunderson, sales manager for Citgo Petroleum Corp. Skimmers can also hide in ATMs on bank premises. Foley says.

“The devices can be found in small and large stores, in urban and rural areas, in new and old convenience stores, so no one is an exception,” says Gunderson.

Gas stations had until April 17, 2021 to update their payment systems to be EMV compliant, meaning skimmer scams could remain a threat to those who do not comply.

In the meantime, take a good look at your device or card reader the next time you use an ATM or self-service checkout. Does the car fit together well, or does something look wrong, different, or like it doesn’t quite fit? “Make sure it doesn’t look fake,” Foley says.

bottom line

While you can use a debit or credit card as a payment method just about anywhere, some places, such as hotels and restaurants, recommend using a credit card. Generally, you can make your payment more secure by choosing a payment method that matches the location where you are making the transaction. So, if you find yourself booking a hotel stay for your next vacation or shopping online through a new retailer, use your credit card just in case.