Debit Card Issues

Some people prefer using debit cards to make purchases because the money for each transaction comes straight out of their checking account. That allows users to avoid racking up credit card debt. However, debit cards have other drawbacks, and they can prove to be more costly than anticipated for people who don't monitor their account balances.

Overdraft Protection

The Federal Reserve requires banks to get customers' approval before allowing overdrafts on their checking accounts from debit card purchases. However, customers who choose to allow overdrafts under a bank's overdraft protection plan may make purchases without considering how much overdrawing their accounts is costing them. Overdraft protection essentially is a short-term loan that covers the shortfall in a customer's account funds. Account holders may be required to pay a $35 fee in addition to the amount the account is overdrawn. Therefore, people who make a debit card purchase that overdraws their account by $10 can end up owing their bank $45.

Withheld Funds

Hotels, rental-car companies and other businesses may temporarily withhold a certain amount on a debit card to cover any additional charges until a transaction is processed. For example, a company may hold $150 on a customer's debit card for a $100 purchase. The additional $50 will eventually be released back to the customer's checking account, but that person could unknowingly overdraw the account if he didn't know the extra $50 was temporarily unavailable.

Transaction Limits

Banks often set limits on the total amount of purchases debit card customers make each day with their cards. Some banks may even limit the number of debit card transactions their customers can make each day. In addition, cash withdrawals made through ATMs may be limited to a few hundred dollars per day. Any debit card limits your bank has set should be outlined in your cardholder agreement. Generally, daily spending limits for purchases range from $1,000 to $3,000.

Reward Limits

Your debit card may come with a rewards program that allows you to get a cash rebate when you make certain types of purchases with your card. For example, you might get a 1 percent cash rebate on any grocery purchases you make with your card. However, you may only be able to get cash back if you sign for your debit card purchase instead of using a personal identification number to authorize the transaction. Banks earn more money on signature-based debit card transactions, according to Bankrate.com's article "Check Card Problems to Watch For." That's because merchants pay a higher fee to banks when buyers sign for purchases.