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Author: FreeCashFlow Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308232  
Subject: Debit cards: What's the point? Date: 6/24/1998 9:13 PM
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I don't understand the boom in debit cards, which automatically deduct money from your bank or brokerage account each time you use the card. True, you don't have to worry about paying them, but if you have the money, is it really that hard to write a check and send off your payment each month?

Don't hotels and rental car agencies require credit cards? Doesn't mail order require a credit card?

Furthermore, debit cards are riskier than credit cards. It's harder to dispute charges on debit cards than charges on credit cards. At least if you have a disputed credit card balance, you don't have to pay the disputed part of the balance, leaving you in a better position to negotiate. For this reason, it is recommended that you pay for hotels and car repairs with a CREDIT CARD so that you have some negotiating power for recourse in the event of bad service. If you dispute a debit card payment, the pressure is on you, because the money in dispute isn't yours until it the dispute is settled in your favor.

Furthermore, if there is fraud, a glitch, or another snafu involving your debit card, this can trigger a chain reaction of other problems at your bank or brokerage account, such as falling below the minimum balance and bounced checks. If the snafu involves a credit card instead, at least you can dispute it and be off the hook during the dispute. In the event of fraud, your liability is limited to $50. On the other hand, debit cards don't have such limited liability protection.

Even more dangerous is the idea of tying a debit card to a brokerage account, which presumably has the bulk of your life savings. You risk having a snafu wipe out your life savings.

Yes, I know about the loanshark interest rates and annual fees charged by credit card companies, but you can bypass them by only using no-fee credit cards and paying off your balances in full and on time.
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