The Perils of Debit Cards

Americans use debit cards a lot. Use of debit cards has grown exponentially and the recent gains coincide nicely with the increased marketing they have received from credit and banking companies. Debit cards are a boon for these companies, they get processing fees still, overcharge fees (at my bank it is almost $40), and they don't have to float you money free for 30 days.

The products are great for people who tend to overspend with credit cards (provided they do not overdraw their checking when using a debit card) and are convenient. But, there are some things you should be aware of.

1. Know your liability policy, the "Zero Liability" that you see marketing generally applies only to cards branded with the Mastercard or Visa logo.
   
   
2. The Zero Liability doesn't apply if someone else uses your PIN.
   
   
3. Potential fraud or stolen cards need to be reported FAST. Debit cards are governed by different laws than credit cards.
   
   
4. It is generally harder to dispute purchases on debit cards than credit.

I don't want to sound the alarm too loud, but these are some things to consider when you visit your local retailer and put down the plastic.

Link
Read more about debit cards.

MBNA Sticks it to Consumers in the UK

I don't have hard data so I can't be assured of the accuracy of this story, but it's certainly not out of the realm of possibility... Credit card companies have always made a killing on people who are late or otherwise delinquent on their payments. Now there are reports that MBNA the huge American credit card issuer has been charging users who use their cards responsibly. British users who have a positive credit card balance from accidentally overpaying or paying twice in the same month have found they are being charged £10 if they don't reduce the positive balance. The policy has been spun - not surprisingly - as a measure to protect consumers against fraud. No word yet on if this policy will be transferred to United States card holders (luckily I don't use MBNA), but if I see anything about it I will let you know. Full story here.