Debit Card Drawbacks

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Story Published: Dec 2, 2009 at 8:17 PM PDT

By Jackie Watanabe

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More people are saying they're using debit cards to avoid running up credit card debts because they're able to control spending better. While that's a plus with debit cards, Consumer Reports Money Adviser says it can be a mistake to use debit cards for big holiday purchases or even small ones you might want to return.

"With a debit card, if you have a problem with the purchase, you can't dispute the charge the way you can with a credit card," says Mandy Walker of Consumer Reports.

For big-ticket items like electronics, debit cards rarely give you a longer warranty, something you get automatically with many credit cards.

Consumer Reports also says If your thieves get a hold of your debit card, they can drain your entire bank account.

"if you don't report fraudulent activity on your debit card within two business days, you can be on the hook for $500 or more," says Walker. "With a credit card your losses are limited to $50."

Another huge drawback with debit cards is that if you spend more than you have in your account, you'll likely be slapped with hefty overdraft fees.

If you don't have a credit or debit card, you may be tempted to use prepaid gift cards, but Consumer Reports says those can be a bad deal too.

"There may be a fee to activate it and a fee every time you use it, and there may even be a fee when you don't use the card," Walker says.

So this holiday season, using a credit card is a smart money move, but only if you keep your balance under control and pay it off right away

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