If you're like me, you may be used to swiping and inserting your debit card for your everyday purchases because most of us don't carry cash anymore.
Debit cards are great for making ATM withdrawals and deposits and paying for purchases around town, but when you travel, you might want to consider leaving your debit card at home. Consider these four reasons before you use the card on vacation.
1. Debit Cards Don’t Do Much to Protect You From Fraud.
Your debit card and credit card may look similar, but the law looks at these two cards very differently when it comes to your liability if a thief gets access to them. Credit cards fall under the Fair Credit Billing Act, which limits your liability for unauthorized purchases to a maximum of $50. So, if someone manages to steal your number and rack up thousands of dollars under your name, you won’t have to re-pay more than $50. However debit cards are regulated by the Electronic Fund Transfer Act, and fraud can be much more costly. If you find unauthorized activity and report it within two business days, you’ll still keep your liability to $50. But if you fail to report it until after that two-day period, your liability leaps to $500. Failing to tell your bank about it until more than 60 business days means you will probably owe the entire amount.
2. Debit Cards Can Freeze the Cash in Your Account.
When you’re checking in to a hotel room or picking up the keys for a rental car, using your debit card will freeze money in your account. Companies need to know that you can actually cover an amount higher than the price you reserved. The hotel wants to know that you have the funds to cover minibar items or tabs at the restaurant that you charge to the room, and the rental car company wants to make sure they can charge you if you don’t fill up the gas tank. So they place an extra hold on your card, which varies based on the company. Marriott, for example, puts a hold on your debit card account for all the room charges and resort fees, plus a hold for incidentals. Many times that hold is not released for up to five business days after checkout. Hertz’s company policy states that a debit card will be charged “a reasonable amount to cover any incidental charges.” In contrast, with a credit card, those holds are a pending charge against your line of credit, not your actual cash.
3. Debit Cards Don't Provide Any Travel Benefits.
Things can go wrong when you travel- lost baggage, missed flights, severe weather, etc. If you book your trip with your debit card, it’s up to you to deal with most of those interruptions. If you use a credit card with travel protection insurance, though, there’s a good chance you’ll be covered. In addition to covering costs that are out of your control, some credit cards can be a life saver in worst case scenarios where you might be at fault. Many credit cards include primary rental car coverage that can help you avoid paying extra for a policy or dealing with the hassles of using your own insurance.
4. Debit Cards Won’t Help You Earn Rewards.
Why use a debit card for every day purchases, such as groceries, when you could be earning points with your credit card? Earning points and miles when you shop can go a long way toward helping you fund that dream vacation. Why don't debit cards allow you to earn rewards? The answer is simple-they don't help banks earn as much money as credit cards. There is a law that limits the amount that banks can charge for fees on debit card transactions to about 21 cents per transaction. Credit cards, on the other hand, are allowed have a wide range of fees. These fees are part of the reason that banks offer such strong incentives for using your credit card.
The bottom line is this- Use a credit card for travel so you can protect your money and earn rewards.