As study abroad studenst or solo travelers, access to our money is mission critical. Debit cards while convenient in hotels have several issues that can be very problematic if used overseas. There is much debate about which form of payment is better however in a recent CBS News report, these dangers associated with the use of debit cards were brought to light:
– Loss Limits: If you are a study abroad student from the US and using a national bank, like credit cards, federal law limits your liability for fraudulent transactions on a debit card to $50 but only if you notify your financial institution within two days of discovering the theft. If you don’t check your bank statements for a couple of months, you could lose everything.
– Pay Now/Reimburse Later: As a study abroad student with a credit card if someone has fraudulently used your credit card, you don’t have to pay the charges. But fraud with a debit card, the money comes directly out of your account in real time. That means you’re out the money until the bank does an examination of their records to investigate your fraud claim. This can take several weeks.
– Merchant Disputes: The same problem affects merchant disputes. If you pay with a credit card when ordering something online while studying abroad, and that product comes damaged, broken or not at all, you can dispute the charge and stop payment with your credit card. If you used your debit card, the charge is paid when you made the order. By the time you find out the goods weren’t what was advertised, the merchant has your cash and you have to fight to get your money back.
– Phantom Charges: If you use a credit card at a hotel while studying abroad, the hotel will take an imprint when you check in, but don’t charge your card until you check out. It’s different with a debit card. Generally, hotels will put a “hold” on funds in your account for more than you’re spending. They hold the full amount of your stay, plus an estimated amount for “incidentals,” such as meals at the hotel restaurant and dipping into the mini-bar. This is not an actual charge–the hold will come off your account at the end of your stay. But it affects the available balance in your checking account anyway and can lead to overdrafts. These “holds” are common for debit card transactions at hotels, gas stations and rental car companies that you might incur while studying abroad.
– Overdrafts: Overdraft charges have been soaring in recent years and for the vast majority of consumers these overdrafts were the result of a debit card transaction. Don’t assume that if you don’t have sufficient funds in your accounts, your bank won’t approve a debit swipe.
– Skimming: Financial crooks have gotten sophisticated in recent years and are using “skimming” machines to read your card data and charge your account. When your debit card is skimmed, your bank account can be drained before you know that you’ve been had.
According to WanderSafe‘s Safety Expert in Residence, retired CIA Safety and Security expert, Thomas Pecora, knowing your rights as a consumer just as important as exercising caution when using ATMs and protecting your pin when shopping, dining or sightseeing during your study abroad year.