3 Times You Should Avoid Using Your Debit Card

February 20, 2018

One way to make sure you don’t spend more than you make is by sticking to cash only by using our good old debit card. That helps you make sure that you’re only spending what’s available in your checking account and can be an easy way to budget, as long as you’re setting money aside outside of your checking account for emergencies and other goals.

However, there are some instances where you may not want to whip out that debit card. Here they are, along with a hack to make sure you’re still basically using cash.

1. When checking in to a hotel

What’s the point?

These days most hotels have a disclaimer at their check-in desk about using a debit card to check in. What is the deal with the “extra hold on funds” or “pre-authorized” holds on your debit card or credit card when you check into a hotel? Since they aren’t actually charging you, and it’s a hold that will likely fall off, it doesn’t really matter, right?

That depends. From what I’ve seen, the range of the hold can be anywhere from $50-$200 per day in addition to the actual cost of the room, including tax. The hotel is essentially protecting themselves in case you decide to destroy the room and is establishing a line of credit for expenses you might charge to your room. And as long as that hold is in place, your bank considers that money spent.

For some, this is no big deal. For others who might be traveling on a tight budget and don’t have extra money just laying around in their checking account to be held up as temporary holds, this could pose a problem. Trying to spend those held dollars before the hotel releases it could lead to an overdraft in your account, even though the hold eventually goes away. As you may know, overdraft charges when money is tight often become like a snowball where the fees lead to further overdrafts and further fees. Ugh, what a way to ruin a trip.

What can you do instead?

You can still use your debit card to pay for your room, just make sure you use a credit card to check into the hotel instead. Yes, I said your credit card. When you check out, make sure you go to the front desk and use your debit card to actually pay for your hotel stay and let the hold fall off your credit card.

2. When shopping online

What’s the point?

Sometimes it seems like the internet is just one big hackathon with thieves stealing your info no matter how hard you work to protect it. Simply put, when entering payment information online for a purchase, there’s too much risk of your debit card number being stolen. Someone could literally wipe out your bank account and send your account into a spiral of bounced checks, returned items, and those pesky overdraft fees.

Also, the rules around debit cards and fraudulent transactions add in a time restriction, typically 60 days. If you’re late at realizing someone made unauthorized transactions on your account and you don’t report it within the allotted time frame, you could be out the money for good.

What can you do instead?

You might think I’m crazy for suggesting this, especially if the reason you’re sticking to cash is because you’re prone to overspending online, but… you probably should use your credit card when shopping online since it’s much easier to get things resolved if your account number is stolen. An important difference is that a fraudulent transaction on your credit card does not deplete your funds in your checking account.

The transaction won’t eat up money you’ve budgeted for important items like your mortgage, rent, your kids’ daycare expenses, etc. Credit card companies are also much quicker with crediting your account back to make you whole from unauthorized transactions.

To stick to the cash-only plan, just take an extra step after completing an online purchase to log onto your credit card and make a payment from your checking account in the amount of your charge. Voila, you’re basically still spending cash, but without the risk to the rest of your balance.

3. When making a big purchase

What’s the point?

Most credit cards offer purchase protection, so if your new washer bites the dust and the manufacturer won’t help, you can put your card company to work for you. It’s much cheaper than an added warranty and usually just as effective.

What can you do instead?

Use a credit card to gain that protection, then immediately pay the balance with cash in your account, just like shopping online.

Of course, for those who are simply not comfortable with credit cards or feel your financial situation is much better off leaving credit cards out of your life, just make sure that you pay close attention to your checking account, so you can address unauthorized transactions ASAP. I suggest checking in each morning as part of your smart phone routine — after checking email, Facebook and Instagram, make a quick check to your bank account to make sure there are no surprises.

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