Paper or Plastic: The Downside to Debit Cards

By Max Webber
In June 28, 2010

Not many people carry cash these days, especially young people.  Nowadays, people are putting gas, groceries, restaurant tabs, event tickets, bills, and basically everything else on their debit cards.  Of course, debit cards are a much safer way to avoid debt as opposed to credit cards, but that’s not the only reason people use them.  Most cardholders will tell you that they prefer to use debit simply for the sake of convenience.  They don’t have to go to the ATM to withdraw cash. And, let’s be honest, a single debit card is a bit easier to cart around than a pocket stuffed with bills and loose change.  However, while a debit card has its conveniences, it also has some inconveniences that are costing people money.

Overdraft Fees

For most people, balancing a check book has become a lost art since the increased use of online banking.  However, a lot of times, transactions are held in a pending period for a day or two, and checks aren’t deducted until they’re cashed. So, what you may hope is a to-the-cent account statement, might not be entirely accurate.  And overdraft fees can be costly.  Bank of America for example, charges a $35 fee for each overdraft item over $5.  While they cap this fee at 10 purchases, that can still add up to a lot of money, causing more debt than you’re prepared to battle.

Security Breach

A debit card is kind of like a blank check.  If someone steals it, they have a direct link to your checking account.  And, unfortunately, if money is withdrawn from an outside source, you’ll typically be stuck with the tab.

Usage Fees

Certain stores and banks can charge fees when you use a card, but where you can really get hurt is at the ATM.  Using an ATM other than one from the bank your account is in can result in usage fees.  ATMs charge from 50 cents to $2.50 just to withdraw cash.  And, sometimes, the bank will charge you an additional fee, for using an outside ATM as well.

For practical reasons, carrying cash is your safest bet for knowing how much money you have.  However, everyone handles their finances differently.  Some people feel they can’t restrain their spending when they have cash readily accessible.  In that case, use whatever form of payment best suits you.  But, for those who use a debit card as if it’s cash, you’ll be much better off using the real thing.