With no interest rates or credit card fees to worry about, it seems that using a debit card is the ideal way to shop online, but this could actually be an unsafe practice.
Disadvantages of debit card use online include:
If you are unsatisfied with your merchandise or something goes wrong, you will have to depend solely on the retailer to make things right. Unlike credit cards, debit cards do not offer this type of protection.
Unless you perfectly balance your checkbook and manage all transactions that go through your checking account, using your debit card can cause you to overdraft. Let’s say, for example, you forgot about a particular charge because it was on an automatic payment schedule or it took longer than usual for the charge to come out (let’s say a student loan payment). You make the mistake of thinking that the money is available, and you purchase items from five different online retailers. Your loan payment goes through and your checking balance is low, and then all of those online transactions go through. Before you even realize what happened, you’re hit with several overdraft fees.
Depending on what you’re buying or reserving, the vendor may put a temporary “hold” on your card before making the final charge. This can be extremely frustrating if you are using your debit card and you have limited funds in your bank account, as this will tie up those funds until they are released.
This is the biggest risk of all. Your debit card is, after all, tied to your bank account, which is where your cash is. If the wrong person gets a hold of your debit card information, you risk having your bank account drained. Unlike a credit card with fraudulent charges that can be disputed, recovering lost money is much more difficult.
So what are the other options?
This is one benefit to keeping your credit card. If you have been avoiding credit cards because you want to get out of debt, consider using them just for online purchases. The key is to pay off what you charge right away, so in a sense, it was like you were using the money in your bank account to pay for your purchase.
A lot of gift cards nowadays, even when they’re not purchased as e-gift cards initially, can be used online.
Becoming more widespread, bitcoins are digital currency that are being accepted by more and more online retailers.
If you have a PayPal account with a balance (for example, from earning extra money online) you can use that to pay for merchandise from a lot of popular online retailers.
Are you receiving structured settlement or annuity payments, but you need your cash now? Peachtree Financial Solutions can help. Contact us today to learn more about selling some or all of your future payments for a lump sum.
Nothing above is meant to provide financial or tax advice. You should meet with appropriate professionals for such services.