Using a debit card is like paying with a check; only the money comes immediately out of your bank account electronically. If there is not enough money in your account to cover the debit, your bank may still honor the charge, but will probably add costly overdraft fees.
- Never spend more than you have in your account. Overdraft fees can be very costly.
- Never give out your personal identification number (PIN) over the telephone.
- Do not carry your PIN in your wallet or purse or write it on your ATM or debit card.
- Never write your PIN on the outside of a deposit slip, an envelope, or other papers that could be easily lost or stolen.
- Carefully check ATM or debit card transactions before you enter the PIN or before you sign the receipt; the funds for this item will be quickly transferred out of your checking or other deposit account.
- Periodically check your account activity. This is particularly important if you bank online. Compare the current balance and recent withdrawals or transfers to those you have recorded, including recently written checks, ATM and debit card withdrawals, and purchases. If you notice transactions you did not make, or if your balance has dropped suddenly without activity by you, immediately report the problem to your card issuer.
- For small purchases, consider using cash. While a debit card can be convenient, the imposition of an overdraft fee may quadruple the cost of that cup of coffee or hamburger.
- If you have a credit card, consider using that instead. While many consumers maintain low checking account balances and thus risk debit card overdrafts, most consumers enjoy more leeway with credit card credit limits. Also, since most credit cards have a payment grace period, the consumer can pay at the end of the month and incur no interest charge.
In some debit transactions, consumers may find more money initially charged against their accounts than they expected. This is a legal business practice called “blocking,” but it is still important for consumers to be aware of this to avoid overdrawing bank accounts.
Blocking most often occurs when you check into a hotel, rent a car or pump gas. Even though your hotel stay or rental contract is just beginning, your debit card company will often block off the entire estimated total, and sometimes more, from your account when your card is initially swiped. For instance, if you are spending three nights at a hotel that charges $100 a night, at least $300 will likely be blocked on your account when you check-in. The actual amount may be raised even higher to include possible incidental charges. If your account balance is low, this can cause problems.
Before using your card, ask the amount that will be blocked, what determines that amount and how long the block will remain on your card. If the block would cause an overdraft or reduce your account balance so as to risk future overdrafts, consider using another form of payment.