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Re-activateThere are two ways to use a debit card—entering a personal ID number or signing a sales slip like when using a credit card. Which way should you go?
Your bank likes when you sign. That's because it charges merchants lots more to process signature-based transactions. But signing puts you at greater risk of identity theft and, under federal law, your liability for fraudulent charges on a debit card can be greater than for a credit card.
When you sign, the payment is processed through a credit-card network and the actual withdrawal from your account occurs later, usually within a couple of days. Some hotels, gas stations, and other retailers will put a hold on funds in your checking account during that time. The hold can be more than the amount of your purchase. If you're running a low balance in your checking account, this can lead to multiple overdrafts—and penalty fees.
We suggest you forgo using a debit card all together for purchases such as rental cars and hotel bills and use a credit card instead. And if you pay off your credit card bill each month, consider using that card for most other purchases as well. This way your cash will continue earning money in an interest-bearing account until the bill is due.
For more on how those convenient debit cards can hit you in your wallet, see "The Dark Secrets of Debit." —Andrea Rock
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