Debit cards are super handy, and for those of us who have learned that hard way that credit cards line the road to hell, they’re a way to keep our finances in check and under control.
There are times when a credit card – or cash – comes in handy, though. There are times, like the 5 below, when not using a debit card could go a long ways to protecting your assets.
In fact, Kimberly Palmer, a personal financial expert at NerdWallet, says it’s “always a bad idea to use your debit card to make a purchase. The only reason you should use your debit card is to withdraw money from an ATM or a bank.”
5. When traveling abroad.
Most people who travel abroad end up buying things, in addition to booking hotels and train tickets and the like. A credit card that will track the purchases is the best option (or cash, if the exchange rate is favorable).
According to financial attorney Leslie Tayne, if you do want to use a debit card, the best thing to do would be to open a new bank account and only deposit a small amount of money in it.
“In case it somehow gets hacked, it’s not tied to the majority of your money. Because a debit card does tie right into money, versus a credit card that doesn’t tie right into your usable cash.”
4. If you’re trying to build your credit.
The purchases you make with your debit card do not count toward your credit score.
Being responsible with a credit card helps you in the long run.
3. Shopping online.
Fraudulent charges can be hard to dispute, and once that money is gone from your account, it could be hard to get it back, according to Palmer.
“Even though banks still have protections in place for you with your debit card, a fraudster could empty out your bank account before you even realize that your debit card has been compromised.
And that’s a huge risk for people because people use their bank accounts to pay for all kinds of things, from utility bills to mortgages and rent.”
2. Hotel stays.
When you use a debit card at a hotel, employees will often put a hold on the amount of time that you’re staying, including extra amounts to cover incidental charges, says Tayne.
“That could definitely impact your ability to use the account for other expenses.”
1. When renting a car.
Like hotels, car rental services place holds on your account when you use a debit card, to ensure the money will be available to pay them when you’re done. You won’t have access to those funds until they’re released, which could lead to overdrafts if you don’t have plenty of money available.
I had no idea about some of these, but I’ll think twice in the future!
How do you decide when it’s a good idea to use a credit card? Give us your finance tips in the comments.