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About Ken Tumin

Ken Tumin founded the Bank Deals Blog in 2005 and has been passionately covering the best deposit deals ever since. He is frequently referenced by The New York Times, The Wall Street Journal, and other publications as a top expert, but he is first and foremost a fellow deal seeker and member of the wonderful community of savers that frequents DepositAccounts.

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Debit Card Dangers - When to Use Credit Cards Instead of Debit Cards

It’s well known that credit cards are generally safer to use than debit cards. If a crook makes fraudulent charges on your credit card, you can typically handle it with a call and some paperwork. The money never leaves your account. However, when there is a fraudulent charge on your debit card, the money actually leaves your checking account. You then have to fight to get your money back. According to this Clark Howard post, "it's now taking longer and longer to get that money back."

To minimize the risk of debit card fraud, Clark Howard recommends avoiding using your debit card at independent ATMs, at self-service pumps at gas stations, at restaurants and for online purchases.

Clark Howard suggests the only reason people choose debit cards over credit cards is to avoid overspending and debt. However, savers have another reason to use debit cards. That’s to meet the monthly requirements on high-yield reward checking accounts. Many of these accounts have much higher yields than internet savings accounts (up to a certain balance). However, to qualify for the higher rate, the customer has to satisfy monthly requirements. Those requirements almost always include debit card usage (see reward checking overview).

So if you’re a saver with a reward checking account, you have to use your debit card. However, you may still want to use a credit card in certain places for safety reasons. Also, savers may still want to use credit cards to earn cash back rewards, especially on large purchases.

Reward checking users: When do you use credit cards instead of debit cards?

If you have one or more reward checking accounts, what purchases do you make with your debit cards and what purchases do you make with your credit cards?

Another issue to consider is making sure the dollar amount of your debit card purchases is not too small. Most reward checking accounts don’t require minimum dollar amounts on debit card purchases. They typically just require that you reach a certain number of purchases per month. There are a few banks and credit unions that do require that each purchase be at least some minimum amount (like $5) or that the total amount for all purchases during a month be a certain minimum (like $100).

Even if your bank doesn’t have a requirement on the amount of debit card purchases, it’s still a good idea to avoid too many small purchases. There have been cases when banks have threatened to close accounts for those making too many small purchases. Even if your bank doesn’t warn you, you may still want to make at least a few sizable purchases with your debit card. The fees that retailers pay on each debit card purchase help pay for the reward checking interest. Those are called interchange fees, and they average around 1% of each purchase. If your total debit card purchases are less than $100 a month, the banks won’t make much on interchange fees, and it will be harder for the banks to afford the high interest rates.

Reward Checking Accounts

To find reward checking accounts available in your state, please refer to our reward checking table. You can also use the table to find reward checking accounts available nationwide. Refer to this post to learn how to use the table.

To learn more about reward checking accounts, please refer to my post 10 Common Traits of High-Yield Reward Checking Accounts.

Related Pages: checking account

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Alskar   |     |   Comment #1
I can't speak for all reward checking accounts, but my reward checking account at Advantis CU counts either credit or debit transactions using the card associated with my reward checking account toward the required 12 transactions a month.  For that reason, I generally use my card as a credit card.  It takes a few days for credit card transactions to clear.  I use this to my advantage by using it toward the end of the month, the charges show up in the next month's statement.  By doing this I usually have met the 12 transaction requirement by the 10th of the month.  I then stop using the card completely until the end of the month.  Rinse and repeat.
Anonymous   |     |   Comment #2
I have 4rca and use them in consecutive order arranged in my wallet...2 need the requirements met by the third wednesday and 2 by the end of the i get the 2 due later done by the earlier deadline..and the 2 due earlier done by the previous months end..that way i can always use it as credit...rarely needing the pin numbers..and guarenteeing the requirements have cleared way before deadline
Anonymous   |     |   Comment #3
...and the banks make more when its run as a credit...which helps make up for the small amounts i sometimes have to charge to get 44 total in a
51hh   |     |   Comment #4
Debit card transactions are the necessary evil for RCAs.  I like to get it over with at the first 4 days of the months (all my RCAs follow the monthly qualification cycle (1st to the 30th/31st).  All purchases are pin-less for me.  I used to do those purchases at the gas station (to annoy the gas station attendants with multiple debit card transactions).  Now I do them all online (utility, insurance, Amazon Payment, and Serve). 

I use credit cards solely to gain rewards.  I have 2% Fidelity card, 5% G/G/D Citi Thankyou card, 5% G/G/D HSBC (now Capital One) card, and Citi Forward 5% restaurant card.
Anonymous   |     |   Comment #5
51hh   |     |   Comment #6
#5: Grandfathered Citi Forward card still earns 5% (in TY points) for restaurant purchases as well as bookstores and movies; FYI.
Anonymous   |     |   Comment #7
To #4

Do you use your debit cards several times in small amounts to pay an insurance bill on line, same for utilities etc.? Example $1-$2 transactions? 
51hh   |     |   Comment #8
#7: No.  I do more debit transactions than required monthly (at least five more).  Besides small debit transactions, I do some larger-amount 3-4 debit transactions ($5 - $10 each).  Insurance payment is one area I pay $7 - $10 each time.  I do small transactions with utility bills (they usually over-charge customers, they deserve this pain:D).
Anonymous   |     |   Comment #9
#7 when you pay utility or insurance do they process as ach or debit?
51hh   |     |   Comment #11

Banks accept PIN-less, PIN, or both for debit card transactions.  Some utility companies do PIN-based (e.g., T-Mobile) and some do PIN-less (e.g., VZ). 

ACH is a different requirement, some accept Billpay as ACH requirement.
Anonymous   |     |   Comment #10
Sorry that was for #8
Anonymous   |     |   Comment #12
This article is inaccruate.  There are regulations that require banks to give a cardholder provisional credit withing 48 to 72 hours.  Most banks will give the provisional credit within 24 hours.  The paperwork is very similar to a credit card affadavit.
Anonymous   |     |   Comment #13
Thank you for this article!

This is also helpful advice on how to avoid skimmers on your debit card:

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