Personal Finance

Debit Card Holiday Shopping Tips

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Debit cards are the plastic du jour this holiday season. According to the National Retail Federation, 43% of consumers will use debit cards for holiday spending, up from 30% in 2005. As for credit cards, fewer than a third of consumers will place their purchases on credit cards – the lowest level since 2002.

While debit cards–which store actual cash– can keep you on a tighter budget, you need to be careful of a few potential setbacks when you shop and travel this holiday season. Here are some tips:

1. Travelers: Beware of Card Freezes

When booking reservations at hotels and car rental agencies, companies may pre-charge your debit card with the estimated amount of your final bill. This may put a “freeze” on your account until the payment actually gets resolved, which may take up to three days. In the meantime, you lose access to that money and in some cases the charge is more than what you expected to pay– and maybe more than what is in your account at that time. Consider using a credit card at that point, but resolving the bill with a debit card, cash or a check.

2. Know Your Fraud Liability

In the event your card becomes compromised and someone hacks into your account, remember that the law extends more fraud protection to credit card users. The Fair Credit Billing Act says that your credit card liability is capped at $50. The same is true for debit cards but you only have two days to make the claim.  After that (but within 60 days) your liability goes up to $500. Some credit card companies offer zero-liability protection on unauthorized debit card transactions, though some restrictions apply. Check with your issuer for the fine print.

3. Have Patience (and Backup): Getting Your Money Back Takes Time

If you dispute a charge with a merchant or, say, a store charged you twice for the one reindeer costume you bought with your debit card this month, you will need to take it up with the merchant, unlike with credit cards which reimburse you while the dispute gets settled. Only shop with reputable retailers.

Are you using debit or credit this year for your holiday purchases? Use the comments section below to share your holiday budgeting tips and ideas for this year!

Download’s free Holiday Spending Planner to keep your holiday spending in check.

Image by Neep, via Wikimedia Commons

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