Thrifty Spending: Issue 54

FEATURE ARTICLE:   Be Careful When Using that Debit Card

Millions of people use their debit cards every day and if you have been in line at your favorite coffee shop or fast food restaurant, you can’t help but notice people make the smallest purchases with them. All the more reason you should keep your receipt and check your bank statement frequently. Although Federal Law limits your liability for fraudulent transactions to $50, if you are negligent and do not report fraudulent activity in a timely basis, you could be held liable for all of the transactions.

Loss of Funds; if somebody fraudulently used your debit card, the money comes out of your account (savings and or checking) in real time. By the time you report to the bank your money is gone and you wait for the bank to do their investigation and credit your funds, maybe a few days or a few weeks. We all know what happens next when we cannot pay our bills. Conversely, fraudulent use of your credit card means you do not have to pay the bill.

Merchant Disputes; if you make a purchase with a credit card, and it is broken or damaged; you can dispute the charge and stop payment. Not so with a debit card purchase. Once the merchant has the funds they may not be eager to assist you with your problem.

Extra Charges??; if you use your debit card to check in at a hotel and a “hold” will be put on your card for more than you are spending to allow for incidentals like meals, phone use, etc. Similarly a gas station purchase or rental car companies may put a hold for a larger amount than your purchase since they do not know how much the purchase will be when you swiped the card initially. If you are running a tight budget, you may not have allowed for these extra charges and this could lead to bounced checks on other payments. Conversely, a hotel will take your credit card and run only the charges incurred at check out.

Overdraft charges; if you have a debit card the bank you have probably signed you up for overdraft protection. This means if you inadvertently used the card or wrote a check for more than you have in your account, then the bank will honor the transaction and charge you anywhere from $30 to $40 for the privilege. That means that $2 value meal purchase now cost you quite a bit more. You would think that the bank should disallow the charge in the first place but just think of the money they would lose if you were not charged the overdraft fee. Expect the Government to review these practices and offer more consumer protection laws later in 2010.

Illegal Card Readers ; it is almost impossible to stop a crook when he is using technology to read your card info when paying at the pump at a gas station or ATM. Crooks can open these machines and place a card reader which will record your account number and pin code leaving your bank account vulnerable and empty within seconds.

In closing we can only stress how important it is that you review your statements, (daily if you have an on-line access) and rethink how and when you use your debit card. Ultimately, the bank or financial institution has made it very convenient for you to have access to your money and if you are not careful, so will everyone else.

MONEY SAVING TIP:  Actual Cash Value or Replacement cost

When you file a homeowners claim the insurance company calculates how much to pay you by evaluating the cost to replace your property with new property of the same kind and quality. But here is the critical distinction; if your policy covers your personal property (your home’s contents) for its actual cash value, the insurance company deducts depreciation from your personal property’s overall value before arriving at a figure.  Your check will be significantly less than the amount it will cost to restore, repair or replace the damage or loss.  However, if you have replacement-cost coverage, the insurance company will pay what it costs to repair or replace your damaged possessions at today’s prices without deducting for depreciation.

Review your insurance policy and make sure you understand what you are buying.  It could save you money if you have to make a claim.

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