Are Debit Cards Risky?

Debit cards are more common than credit cards, with more than 80 percent of consumers using one, according to the Federal Reserve. However, despite their prevalence, debit cards may not be as financially secure as credit cards. Before using your debit card, consider the risks.

Withholding Payments

One of the key differences between using a debit card and a credit card is that you can withhold payments when pay with a credit card. Credit cards allow you to stop payment on a transaction when you are not satisfied with the outcome. For example, if you make a big ticket purchase online and you do not like the goods when they arrive, you can simply reverse the credit card charge. With debit cards, the money comes out of your account immediately and you cannot reverse the charge without help from the seller or a preexisting buyer's protection plan from your banking institution.

Liability Rules

If you lose a debit card, you could be liable for fraudulent charges made with your card, based on the Electronic Funds Transfer Act. When you report a lost card within two days, you will only be held responsible for up to $50 in fraudulent charges. If you wait beyond two days, but report it before 60 days, you will be responsible for up to $500 in fraudulent charges. After 60 days, you are liable for any charges made. By comparison, with a credit card, you are only liable for $50 at a maximum. However, these rules vary by institution and some banks are willing to return all fraudulently spent money, particularly for those with a consumer's protection plan.

Delay Discovering Fraud

When you use a debit card online or at a regular retailer, there is a chance that someone could steal your debit card number to make purchases fraudulently. A problem arises if you don't realize it until you check your bank statement or your bank notices an irregular spending pattern and informs you. If you do not check your account statement regularly, you may not find out about the infraction in time.

Safer Than Cash

Although debit cards are riskier than credit cards, they remain safer than cash. If you lose cash, you will most likely never get it back. Alternately, if you make a purchase with your debit card and you file a complaint, you can sometimes have the transaction reversed. Moreover, if you lose your card, you can call the bank to have them cancel the card and issue you a new one, even undercutting fraudulent purchases. No such protection exists for cash.