Why you shouldn’t have a debit card for your primary checking account

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Debit cards are pitched as a way to not spend money you don’t have. But that doesn’t stop consumer expert Clark Howard from disliking them for a couple of very valid reasons!

RELATED: Lots of banks are offering free cash to open an account: Should you bite? 

Know the dangers of debit cards

Debit cards are typically tied into your primary checking account so that the money you spend comes directly out of there, rather than being borrowed from a bank via a credit card.

By doing this, you avoid paying interest charges if you can’t pay your balance in full — because you’re only spending what you have to begin with.

It’s no surprise that debit is promoted heavily as the perfect solution for budget-conscious consumers who don’t want to use credit to charge up money they don’t have.

But there are a couple of inherent flaws in the DNA of debit cards, according to Clark.

Debit cards have inferior protections for consumers

First, a debit card doesn’t have the same protections under federal law that a credit card does.

For example, let’s say your debit card or card number is used by criminals to take money out of your checking account without your knowledge. Per the FDIC, there is a provision under the law that will cap your loss at a maximum of $50 — if you report the crime to the bank within two business days.

However, if you fail to notify your bank within that timeframe, the $50 liability cap goes away and you could be on the hook for a lot more. So that puts the burden on you to be “Johnny on the spot” and check your account frequently!

Now let’s look at another scenario. Let’s say your debit card number is stolen because you used it while shopping online. Under federal law, if you report it within 60 days after any bogus charges post to your account, you won’t be responsible for those fraudulent charges.

But should you let it go unreported past that 60-day mark, you could potentially lose all the money in your account. Some banks have a zero-liability policy to mitigate the risk to you, so be sure to ask.

Debit cards don’t have the same finiteness as cash

The banking industry pushes debit cards as being almost equivalent to cash since you can only spend the money you have on deposit in your account. In theory, that’s supposed to limit your spending.

But there’s a psychological factor the banks are missing here, according to Clark.

“There’s a completely different psychological thing with cash,” the consumer champ says. “If I go somewhere and spend a $1 bill, it’s gone, right? I’ve got to come up with another one to have more.”

You can’t say the same about a debit card, which you can take from store to store as your run around town. It never runs out until your money runs out.

“There’s a sense of finite-ness with physical cash that you don’t have with a piece of plastic,” Clark notes.

In fact, one recent study found that people spend 12% to 18% more at fast-food restaurants when they use plastic instead of cash.

And just in case you’re wondering, yes, Clark does use a debit card! But he only uses it pull cash out of an ATM when he needs it. He never uses his debit card for point-of-sale (POS) purchases at the register.

“If you’ve had trouble making sure you have more money than month, and if you know you have not been able to discipline yourself [with spending], then nothing beats cash,” Clark says.

Here’s how to use debit cards without exposing yourself to the dangers

People like debit cards because they’re convenient and we understand that.

But if you want to continue using debit in your life, Clark has a key piece of advice: Be sure you set up a separate account to tie it into. You then fund that secondary account with what the penny-pincher calls your “walking around” money.

By doing this, your primary checking account — the one out of which you pay your mortgage or rent, car loan, student loans, monthly bills, etc. — is walled off. There’s no debit card tied to it as a potential weak link.

The weak link is only tied into that separate, secondary account, which you fund with money for shopping, dining, etc. — basically anywhere in your life that you’re tempted to use a debit card.

It’s a way to give yourself another layer of protection. Should your debit card be breached by criminals, they only have access to your secondary account. You can rest assured you’re not putting your main money for living expenses at risk!

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