3 Important Reasons Single Moms Should NOT Use Debit Cards
Just a few days ago, my sister’s debit card was stolen. Within three days, the thieves has used it in 16 stores and spent more than $4,000.
And because it was a debit card, that money all came straight out of her bank account. That’s reason number one to ditch the debit card: If it’s stolen, you lose money immediately, and that means you won’t be able to pay your rent or your bills – a devastating experience for single moms.
Worse, if you don’t notice it in time, your checks will bounce, you’ll overdraw your account, and you’ll also be hit with late charges, bank fees, and interest rate penalties. Even when money isn’t tight, having your entire bank account wiped out – possibly along with other accounts linked to it – sets the stage for financial disaster.
And, by the way: The bank didn’t send my sister a fraud alert, even though the purchases were made hundreds of miles from where she was. If she hadn’t been doing some online banking, she wouldn’t have known about the fake charges so quickly. And she wouldn’t have been able to report it within two business days.
But if she’d found out just one day later, she would have been on the hook for $500, no matter what the bank’s investigation turned up. That’s reason number two to ditch the debit card: If a thief uses your debit card, you may not get your money back. Whether or not you get any money back at all depends on when and how you report the problem.
Here’s the timetable for stolen debit cards:
- If you report theft before the card is used, you’ll get all your money back.
- If you notify the bank within 2 business days of the theft, you’ll lose $50 and get the rest back.
- If you wait longer than 2 days, but still report within 60 days of the date your account statement is printed, you’ll be out $500.
- If you wait longer than 60 days, you’re out of luck – the bank doesn’t have to return any of your money.
If you still have your physical card but someone stole the card number, you have 60 days to report it to get all of your money back. But after that, again, it’s 100% your loss.
No matter how long it’s been – report it. You are never responsible for fraudulent charges that occur after you’ve notified the bank.
And, of course, there’s a catch. Most of the time, reporting the theft by phone isn’t enough to secure your money. Many banks require you report your loss in writing, either by sending a detailed letter or filling out an online form. If you don’t follow-up your phone call with something in writing, the bank could say you failed to officially report the theft.
Keep in mind, even if you make a report before the theft occurs…even if you report a theft right away…banks can wait 10 days (sometimes longer) before they give you back a dime of your stolen funds. That 10 days can make the difference between paying your bills on time and being hit with late payment fees.
That brings us to reason number three: Debit card theft is on the rise, increasing by a crazy 70% in 2016. And with the Equifax breach, it’ll probably shoot up a lot faster this year. On top of that, thieves can buy “skimmers” for less than $100, and steal your number any time you swipe your card. Dishonest sales clerks and waiters can copy down your card number.
And while they can do the exact same thing with your credit cards, credit card theft doesn’t instantly drain your bank account the way debit card theft does. Plus, credit cards offer much stronger fraud protection than debit cards: with stolen credit cards, you’re never liable for more than $50, no matter how much the thieves spend.
A lot of single moms use debit cards so they won’t go overboard on credit cards. That’s smart when you’re trying to pay down debt and stick to a budget – but in this case, using your debit card could end up causing unrecoverable financial problems.
So if you’ve been using your debit card to avoid running up your credit card, try this instead: Set up a separate bank account for credit card charges. Every time you use a credit card, transfer the money into that account right away – it would have come out of your account anyway if you’d paid by debit card. By doing that, you’re protecting your money without the danger of running up credit card debt.
If that option doesn’t work for you, try using a prepaid debit card. That way if someone does steal it, you only lose the balance on the card – not your entire savings.
Bottom line: If your debit card is lost or stolen, report it immediately. Check your bank balance often. If anything looks funky, or if you even suspect fraud, report it immediately. Waiting even an extra day or two can cost you hundreds of dollars…so don’t wait!