Debit or credit? The answer is in: shoppers love their debit cards and use them more often than any other form of payment. Sure, they are convenient. But if you're going to use your debit card regularly, do it right.
- Get something for it. Only about half of the banks that issue debit cards offer credit-card-type rewards programs, according to a survey, so make sure yours is one of them. And learn how to get with the program. Citi-bank, for example, offers higher rewards for customers who use the card with a signature than for those who use a PIN (merchants pay issuers less for PIN transactions).
- Protect it. Things can get ugly when a debit card gets stolen, because a thief can use your card like a credit card (a PIN isn't usually required), but the money comes directly out of your checking account. So an impostor with your card can clean out your checking account before you know your wallet is missing. Then those rent and utility checks start to bounce. That's worse than if your credit card is stolen, because you can dispute fake credit charges before they affect your other bills and bank accounts. Most banks promise to make you whole again, but the time spent calling and explaining your predicament to landlords and electricity companies can be miserable. Sign your card and keep it separate from your credit-card wallet. Don't use your account number at in-secure Web sites or loan it to friends, and watch your transactions closely.
- Keep track of what you've got. Most banks are happy to let you use your debit card to overdraw your checking account and then charge overdraft fees as high as $30 for each transaction. So keep a close eye on your bank balances.
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