Debit Cards and Motorcycles Just Aren’t Safe

Posted on March 18, 2013 by Mary Hunt in Home & Family 32 Comments

For decades I’ve pleaded with you to not use debit cards because they are not safe. And for years I warned my sons about the dangers of riding motorcycles because they are not safe.

Has anyone listened and taken heed? Debit cards are more popular than ever. And on the subject of motorcycles in my family, to date I have a 50-percent fail rate. For me, debit cards are the motorcycles of personal finance.

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I’ve concluded that the best I can do now that so many refuse to give up their debit cards (and motorcycles), is to nag, preach and harangue on the importance of crash helmets and safety equipment.

The odds are stacked against you in both debit cards and motorcycle travel. You must know what you are dealing with, how to react and what to do when things turn ugly.

THINK LIKE THE BANK. For you, a debit card is a convenience. For your bank, it’s a huge moneymaker. If you allow your account balance to get too low you could get socked with big bounce fees. If you forgot to track a few small debits and a large check comes through later in the same day, many banks will hold the small debits and honor the large check first and then charge you a $34 bounce fee for each debit transaction that exceeds your balance.

CREATE A CUSHION. If you use a debit card, you cannot afford to let your account run low. Figure out a way to keep a cushion that you never use as your protection against inadvertent bouncing.

KEEP TRACK. The bank will not stop you from using your debit card just because your account runs dry. In fact, they are quite happy when this happens so they can whack you with huge fees. Get online and access at your bank’s website so you can check your balance and account activity every day.

STICK TO CASH. Cash is cool because it is limiting. Cash can’t bounce. I find spending cash keeps me more aware of what I’m doing. Plastic just isn’t the real thing. Retailers love to see you swipe a plastic card for payment because they know you’ll spend more in their store than if you are limited by the cash in your wallet.

DEPOSITS SLOW, DEBITS FAST. Don’t assume you’ll have immediate access today to funds you deposited today. Most banks place a hold on deposits for a few days, others for up to a week. And if your debits come through while the deposit is on hold? Brace yourself. It will be just as if you had never made the deposit.

SPEAK UP. Don’t assume anything. A bank’s policies and guidelines can change overnight, so keep up. And if you get burned by your bank, don’t take it lying down. Speak up. Explain your situation and ask them to waive the fees and penalties. If your bank or credit union isn’t known for its customer-friendly policies, remember there are plenty out there that are.

Question: So, what do you think about using debit cards after reading this article? Do you plan to make any changes? Join the conversation here. 

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Posted on March 18, 2013 by Mary Hunt in Home & Family 32 Comments
  • Caren

    I have just recently stopped using my debit card and carry checks with me instead which I rarely use but are there for emergencies. I use cash. Yes I agree, I spend less.

  • Gwammie

    I do use our debit card a lot. We use it at restaurants the most and at other places that won’t accept checks (like WalMart). BUT I am meticulous about my checkbook. I will not sign the receipt at the restaurant or get out of the line at the checkout until the amount is recorded in my checkbook. (Yes, some people get annoyed with me, but so what? It takes seconds to get that number written in there.) Because we bank with a small community bank, they know us well. We did get a call once from them when we appeared to be overdrafted BEFORE the account was charged any fees (turned out that the bank had made an error), and it was nice to know they were looking out for us like that. (Well, not nice to know they made a mistake but at least they owned up to it.) I cringe when people tell me they went online / to the atm / called in to check their balance and “Gee, it was higher than I thought, so I spent it.” You know what the rest of that story is. I don’t spend any more than I would have with cash because I know my limits. And as my father once said, “I raised you to be frugal but you turned out to be downright cheap.”

    • Grace

      I like using cash lately because I put the coins away and don’t miss them. They really add up. I do spend less when I have cash.

    • PH

      Walmart doesn’t accept checks? When did that change?

      • Dana Tompkins

        Good question – my Walmart does.

      • Tonya

        Walmart accepts checks, but they run them through as an automatic withdrawal (just like a debit card) and hand the check right back to you.

  • BobbyeBee

    I often use a debit card because we travel, and carrying large amounts of cash just doesn’t work. I do check my balance every day, and am meticulous about registering anything I spend in my Quiken. In restaurants, we always use cash (have found a couple places that ATM does not charge any fees) to pay for our meal, and for the tip. I’m not comfortable handing my debit card to a wait person I have never seen before.

  • ely.summers

    I dumped the debit card about a year ago and have gone cash only. Surprisingly I am saving money hand over fist, probably because I am keeping within my budget and tracking every penny.

  • Maxine Moore

    I am rereading this, but it seems to me that none of the warnings here are different than would be made for check writing.

  • http://www.facebook.com/deborah.wilkins.3323 Deborah Wilkins

    I use my debit card and plan to continue to do so. I do, however, have a “cushion” of $500 that I never touch and am very glad of that as my bank has now started charging $5 a month if your balance goes below that. I will say that I never use my debit card for online shopping, not because I’d spend more, but because I don’t think that’s a good financial move as it’s tied to my checking account. I am very frugal and spend the same no matter the form of payment, debit or cash. I shop with a list and don’t buy anything that is not on the list. This has not always been the case and I thank Mary for that. In the last year, I have managed to pay down my credit card balance from almost $10,000 to just a little over $2,000 and will have it paid off in the next few months. Thank you, Mary!

    • Dana Tompkins

      Congrats on the pay-down!

  • DianaB

    Wachovia was absolutely famous for holding deposits and running through the bigger debit items before the smaller ones to create overdrafts. I have paid them a boatload in overdraft fees and because of that went to a credit union account. Unless something has changed after they became Wells Fargo, I am sure you have all found out the same thing.

  • momof2

    I somewhat disagree with the article about banks not having instant deposits. I live in a rural state, and we’ve had instant deposits for a few years now. Also, I’ve implemented an option where I cannot continue charging with my debit card, without having money in my bank account to cover those charges. As far as carrying cash you are more likely to be short changed through human error, not to mention the amount of germs passed through the handling of cash. However, I do agree that keeping a cushion in your account is mandatory whether you use debit cards or cash in your daily life. Just like anything, don’t let your credit or debit cards control your impulse to buy things you want, instead focus on your needs.

  • Colleen

    Because we live in a very rural area, it is difficult to get to a bank/ATM for cash withdrawals (especially an ATM that doesn’t charge horrendous fees), so I do rely heavily on my debit card. However, like others who have already posted, I track every transaction meticulously, never use the debit card for online purchases, keep a substantial cushion and use an overdraft protection feature on my account, and finally, I bank at a small-town credit union that watches out pretty well for their customers. Yet due to today’s article, I would like to try and figure out a cash method instead of using the debit card so much. (Hint: maybe a future DPL Everyday Cheapskate column could give time-and-distance-strapped readers some tips on how to transition to using cash more often? :) Thanks, Mary!

  • Don

    I saw a previous article by Mary and cancelled my Debt Card at that time. I use a credit card very sparingly and try to pay with cash or check.

    • R.Marie

      you should have gotten rid of the credit card and kept the debit card. Now to me credit cards are EVIL!!! ;)

  • Pat

    I have used a debit card for many years. Bank of America was the bank we used. The local B of A branches will be sold to another bank this month. In the process of closing our B of A checking and savings accounts, I decided to take cash. I have the cash locked down in my house. We do not have debit cards from our new bank yet. We have been without debit cards for about 2 weeks. You are completely right about the debit cards. I currently have to withdraw the cash from the bank to buy groceries, gas and other needs. With a limited amount of cash in my purse I HAVE to keep to a tight budget. As for holding cash at home, I find it easier to save money when I see the amount of cash growing much faster than I imagined. Also having cash at home will allow us to buy the necessary items we might need in a natural disaster. The ATM machines may not be working if the electricity is out!!

  • kaetra

    Sorry Mary, but for my family/circumstances I completely disagree with this one. Cash is definitely the “dangerous” option for us! I use computer software to budget and track my spending. Being able to see, categorize and download itemized purchases from online accounts makes it much easier to enter things into my budget software and stay on track. Since I started using the software 9 years ago we have went from having zero savings to tons of savings, and “big-picture” personal financial data that has made all the difference. Boy do I love seeing those bar graph lines of our Net Worth moving up! It’s fantastic motivation. I use a monthly and an annual budget, and the various reports I can pull and customize are SO helpful. Our household finances are run like a professional business and I couldn’t have done this without the software.

    Could I do that on a Cash-Only diet? It would be very difficult. Cash spending is exactly the opposite for us. If I we ever have cash it gets spent on heaven-knows what. I can’t imagine running around with envelopes of cash, that seems crazy to me. As far as “safety” goes, if I lose or misplace a $50 bill (or the grocery cash envelope for example!) I’m out of luck. But if I lose a card I have protection. Also, all the small change you get back when you shop with cash just goes to waste and winds up in a change jar somewhere not earning interest until you haul it to the bank to deposit it.

    Cash-only might work great for some people or for those who have no idea how to operate on a budget. But for finance and tech savvy folks there is definitely a safe and responsible place for debit cards and even a credit card.

    • marysews

      I also keep meticulous track of my money. I always know when and how much money I can put on my debit card.

    • Tonya

      I guess it just all depends on how disciplined you are and what works for you. Cash flows through my fingers, but I do pay more attention if I have a definite amount in my pocket that I’m allowed to spend. I do spend more with a debit or credit card, or at least don’t pay as much attention to how much the things in my cart add up to. But I have yet to try a completely cash-only diet. I probably ought to try, just to see how it works.

  • vjcj

    A few words about debit cards and overdrafts. Call your bank and make sure you have “opted out” for payments of overdrafts for one time purchases using your debit card. Ask your bank how they post items when they are presented for payment. The FDIC issued guidelines to banks for posting items. See if your bank is following those guidelines. Ask your bank for a checkbook register if you don’t have one. Enter each and every transaction. Just becasue you may not carry checks doesn’t mean you don’t need to record the transactions. Support the banks that treat you right.

  • http://www.facebook.com/profile.php?id=38307242 Mary K. Marlatt

    My bank has an “opt-out” of bounce protection option. Of course, bounce protection is the default. Now that I have opted out, if we don’t have enough money to make the purchase, my card is declined. That’s fine with me and I would rather not make the purchase and not be hit with a fee. I keep a pretty good eye on the balance, but occasionally my husband doesn’t look or ask about the balance before making a purchase, so this is a good option for us.

  • Tonya

    USAA is really great about processing deposits first then debits. Everything is held until midnight, at which time the deposits go in first. When a paycheck or other deposit is pending, they count that as available funds. My paycheck is always available the day before payday, and the checks I deposit with my iPhone show as available funds immediately. I love USAA! I have started using my credit card more and my debit card less since reading Mary’s opinions on debit cards. My credit card balance comes up on the same page as my checking account balance, so my available balance is easy to figure–checking account balance minus credit card. It’s working so far and getting me back some good cash-back benefits!

  • Jeannine Van Buren

    I used by debit card for years. Until one day when I got call from fraud division of bank VISA. Some one was using it and putting 100.00 to 150.00 each transaction. They closed the account after second transaction and they tried to use it 2 additonal times. Had to put claim in and it took 7 days but it was put in my account. Now I will not use card unless its emergency.

  • tinydogpries

    I have and use a debit card on a regular basis. I do not have a credit card and I like it that way. For me, the debit card is like cash. I know what I have available and I keep purchases under that amount. If I am saving for some particular need or want, then I hold out cash for that item or need. If I were to keep cash on hand for everything I’m quite sure that I would soon become totally confused and be spending money that was intended for something else. I have done the envelope method for bills, and it worked very well. My life situation has changed, however, and it no longer is effective for me. I check my bank account frequently and always before going out to make a purchase. I recently acquired a Bluebird account through American Express and I am very happy with that. There are some places who do not accept payments through them, but for those individuals I can use my visa debit through my Credit Union. Unfortunately I also opted out of a payment protection plan through the credit union and discovered that even though the credit union will then deny payment for an overdraw, they STILL charge the same fee as if they had made the payment. That is when I added bluebird. They charge no fees. If you don’t have the money, they don’t make the payment. Unfortunately I do not have the funds available to carry a cushion on the accounts, I am very low-income and my income just meets my expenses. I have never been able to spend money freely and, therefore, am not in the habit of doing so. Purchases, for the most part, are planned in advance with extremely little frivolous spending. Having extra money to spend sets off red lights and sirens that that money needs to be held on to tightly because it WILL be needed down the road. I LOVE my debit cards and nothing in Mary’s article frightens me in the least.

  • Robin

    Not one of these is accurate as far as my banking goes. My bank (USAA) doesn’t charge bounced debit fees, I have overdraft protection that draws first from my savings account and then from my credit card.My debit transaction WON’T go through if there’s no money in the account. In the event that two debits drop in together that cause the account to go in the negative, I just go in the negative-no fees, nothing. I do check my account daily. My bank makes deposits available IMMEDIATELY-even a personal check. Also, if cash gets lost there’s no recovering it.

  • Karen

    I really have to say that I wholeheartedly disagree with your reasons for not using debit cards. They are reasons to take precautions, sure. Reasons to be wary, on the ball, diligent, etc. but…not to avoid them like the plague! I also think there are some valid reasons to avoid them in certain cases for security reasons, but most of the arguments that you present above also apply to checks, which in many cases are unavoidable (our water bill can only be paid by personal check). Also, I really don’t see the argument for using cash only. I know it works for some people, but for me it’s risky (what if I lose my wallet??) and “easier” to spend a dollar here and there without thinking much. I’m more likely to say “okay” to that $1.50 snack if I have cash, but if I use a card I’m likely to pass. I realize that for you personally, using a debit card is not the way to go, but I really don’t feel like this is a major argument you should be pushing onto your readers.

  • Winnewest

    Debit cards are dangerous in another way, also. Last year I decided to try out my new debit card at the grocery store. It was issued through Chase Bank. I hit “debit” and proceeded to type in my number code. It kept coming up incorrect so I told the cashier that my code wasn’t correct. She said “That’s ok. Just hit the credit’ button and it will go through. It did go through. I said to her “You mean I don’t really need a number passcode to use my debit card?” She said that was right. I said “Do you realize someone could find my card and just hit credit and clean out my bank account? I thought one of the benefits of a debit card was the security of the number passcode.” She said she had never thought of that and I was completely correct. When I got home I put my debit card away and never carried it again. Lesson learned.

    • R.Marie

      All the stores where I live check your ID when a debit card is used as a credit card. Although people could still use your card you are covered and as long as your report it to your bank right away they will refund the money taken. Every bank has different limits on how much the customer is liable for.

  • HappyDay!

    I, too, live quite a ways from our bank, so I visit my bank once a
    month. On the first, I take out a budgeted amount of cash for all four
    weeks of the month. I make one week’s allowance last for seven days. If there’s any left over, it goes into my “money hole,”
    which is where I save up for something I want or for a fun trip. It has also
    been used for emergencies. I try really hard to put something away each
    week from my allowance, because it’s so nice to have a little butter n’
    egg money! My bills are paid by online bill pay or by check. I pay everything else with cash and track my receipts in a little notebook. I’m thinking about getting a prepaid VISA card and an
    iTunes card for online expenses instead of using my credit cards. Having to pay a VISA bill at the end
    of the month is irritatingly budget-busting. I’ll save ahead for those
    two cards, and I think they’ll be nice to have. I keep two credit cards
    at home that pay cash back, and I have replaced my large wallet with a
    tiny coin purse with enough room for my weekly cash, my drivers license
    and a grocery store rewards card that really pays off. Every time I
    take my little kiss-lock coin purse out, I am reminded of how simple and
    finite my allowance is, and it also brings a smile to cashiers’ faces.
    I am recently retired, and I now see how much of my previous money
    angst has come from not having enough time and energy to mind my finances with
    care and thought. I’ve always kept a notebook with meticulous
    care, but the numbers were rarely kind to me. Now that I have time to
    work things through, and I’m not so dog-tired, I think clearly, plan,
    correct the errors of my ways, and absolutely enjoy the arithmetic of living within my means. If you’re overwhelmed, as I was,
    perhaps an appointment with yourself to get your head around your
    finances would help. I should have done more of that, as impossible as it seemed to find the time. Also, I see that
    I could have easily, quickly made my own laundry soap, fabric softener and
    healthy dog biscuits — and saved a ton. The “good” stuff is so
    expensive, and it’s amazing how what makes a product good, in my
    opinion, is that it is not harmful. By making my own, the ingredients
    are healthy, simple, and a fraction of the cost. Mary’s Laundry Soap recipe got me started! Thanks, Mary! Fabric softener: Use 1/4 cup vinegar in rinse cycle (doesn’t make clothes smell) and a small ball of aluminum foil in dryer for static.

    And for Dog Treats:

    Sally’s Pumpkin Nut Cookies
    Makes 20 doggy treats

    1 can pumpkin
    1/4 cup peanut butter
    2 eggs
    1/2 c. peanuts
    1/4 t. cinnamon
    3 cups brown rice flour

    Mix in flour until the dough comes away from the bowl. Make 2″ balls, criss-cross with a fork (with love), top with a fancy nut and bake on a pizza stone until hard at 350 degrees, about 30 minutes. Can let cool in oven overnight to make a little drier. Serve every morning with coffee (that’s for YOU!)

    I realize I went off on another topic, but I didn’t think you’d mind saving some money. All the best to you!

  • R.Marie

    I have to disagree with you when it comes to debit cards and motorcycles not being safe. I understand where you are going with this and that if you are not responsible with them you can get yourself in trouble. But to say they are not safe is going a little too far. Debit cards, when used properly are a huge convenience. If I don’t use a debit card how am I supposed to pay for my plane tickets when I visit home or rent a car or get a hotel room? I certainly don’t want a credit card (no not one). Cash is king and in many circumstances it is my preferable way to pay but there are just some things that I need a debit card for and other things that make it convient to use, like paying some of my recurring monthly bills.

    Oh and I have my debit card set up that if I don’t have the money in the bank then the charge is declined. I really don’t use checks so I don’t have to worry about a check that I forgot about that hadn’t cleared. Besides the fact that I have a written budget and I keep track of all my family finances, including purchases, with software.

  • Suzie

    There is another problem with debit cards…(unless I missed it mentioned). With a debit card if an unauthorized person uses the debit card numbers, (whether they have possession of the card or not), they ALSO have access to ALL of your bank accounts at that bank!!! I had someone get my debit card # from Amazon apparently. (Because the purchases were on Amazon?) And they cleaned out my bank account! The bank told me it takes FAR LONGER to fix this type of problem than for a credit card. I now use checks again, cash or credit card & pay it off immediately. But you really have to be disciplined to make sure you pay the credit card off within the month.