Debit card and the risks of using it!

I have heard and seen a few cases of fraudulent charges made on debit cards. Amounts charged ranged from a few dollars to a few thousand dollars! But luckily, almost all the cases ended on a happy note with the money returned to the owner after investigations by the bank.

Personally I have never used a debit card before (used cash before I had a credit card) but I know the risks faced by debit card users, are the same with credit card users.

Let me give you a few tips to protect your money.

Before that, you must know how a debit card works.
A debit card works exactly like credit card and NETS combined. The parts that are identical to credit card: the card goes through the card terminal, signature may be required and there is a charged slip for the purchase. The part that is identical to NETS: the money is deducted right away! Hence, you need to have money in your account before the transaction is approved.



So how can you prevent or minimise your loss?

1) Never use a debit card at all.

Giving your debit card to the waiter/waitress at the restaurant while you wait at your table is akin to giving your ATM card + your pin number to a stranger. You never know what can happen in between the wait.

2) Never use a debit card for online transaction

Using a debit card for online transaction is as unsecured as using a credit card for online transaction. Your card details may be stolen and you may get fraudulent charges on your card.

3) If you really need to use a debit card, keep the money in your account low like S$500.00 or S$1000.00

Or, keep it low at all times. Transfer the money only when you need to make the purchase.

4) Never use a debit card that is linked to your main savings account

You are giving thieves out there to access your entire piggy bank if you use a debit card linked to your main savings account!

For points (1) and (2), you may argue that the risks faced by debit card and credit card users are the same, then why is using credit cards encouraged but using debit cards is not encouraged?

Firstly, credit cards offer perks which are usually much better than those offered by debit cards. Some debit cards do not offer any perks for some purchases at all. Weighing the pros and cons, the benefit of using a credit card is there but debit cards may not give you much benefit for the same exposed risk!

Secondly, if you get a fraud charge on your credit card, you do not need to pay for it while investigations are ongoing. BUT if your entire kitty has been wiped out due to fraud charge to your debit card, you may not get any cent back until investigations are completed and this may take weeks! Worse if your main account is being wiped out. You will be broke for the duration investigations are ongoing! (Of course, you may seek redress from the bank and they may return the money to you first, but there is no guarantee on this)

The point to take home is, try not to use your debit card and if you really need to, link it to an account with small amount of money.



Tags: debit card, credit card, fraud, fraudulent charge, risk, loss