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The Debit Card Dangers College Students Need to Know About

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For many students, going to college marks the beginning of financial adulthood. But figuring out where to start isn’t easy. Credit cards, cash, debit cards — what makes sense for someone learning how to live and manage money independently for the first time?

“People right around this time — all year long, but specifically around this time — ask ‘What kind of card do I send my kid to college with?'” Alex Sadler, managing editor of the personal finance site Clark.com, said.

It makes sense that consumers bring those questions to the company’s various “Ask Clark” channels. “Clark” is Clark Howard, a consumer expert, who has been committed to spreading his “save more, spend less” knowledge ever since he retired at the age of 31 in 1987.

Given Americans’ dismal savings habits, the thought of retiring comfortably in your 60s is enough to make anyone giddy. So when someone finds a way to retire at 31, naturally people want to know that person’s secrets. Hence the large community of consumers asking Clark (and his team) about financial tools for college students.

Which brings us back to the question: With all the options out there — credit, debit and prepaid cards, in addition to cash — what makes the most sense for college students to use? (We have an expert guide to credit cards for students here.)

We’re hosting a Twitter chat on that topic with Clark.com on Aug. 18 at 3 p.m. EDT (more details below), but today we’re going to focus on just one of those products: debit cards. We asked Sadler what college students need to know about using them at school. Here are her answers, edited for length.

Let’s start with the positives: What makes debit cards a good choice for students?

A lot of people go to college with debit cards because of the same reasons that make them attractive to people in general: With a debit card, it’s easier to track your spending. You can’t spend money you don’t have. Post-recession, debit cards became really popular because of that. Students are carrying debit cards because they don’t want to spend more than what’s in their checking accounts.

In general, what are the risks of using a debit card (regardless of whether you’re a student)?

Fraud. Using [a debit card] to pay at the pump at gas stations, because skimmers are so common — same thing at grocery stores, skimmers are common. And we’ve seen the same thing at restaurants. You may not know the restaurant employee from Adam, and it’s easy for them to take the card and write down the numbers. Independent ATMs — there’s a much higher risk for ATM skimmers being on there (than on a bank-affiliated ATM). Online shopping if you’re using public Wi-Fi — those are hotspots for criminals.

And the problem with debit cards is they’re linked to your checking account.

If you don’t take the right steps (after debit card fraud), you won’t get your money back. If you report it within two days, you could lose $50. If you report it within 60 days, you could lose up to $500, but not any more. If you don’t report it within 60 days … you’re out of luck. Credit cards — if your card is stolen, you’re not responsible for more than $50 if you report it at all.

So what makes debit cards risky for students?

People aged 20 to 29 are more likely to be victims of identity theft and fraud than any other age group, so obviously it’s a big problem on college campuses. When you fall victim to a criminal using free wifi, sharing too much information to social media, leaving your card in your dorm room and not locking it, writing your PIN on your card — college students are one of the biggest targets for identity theft because of the typical behaviors of a college student and being unaware of the risk.

What do you tell people who ask what kind of card is best for students?

Prepaid cards are a great option. It’s still a way to control your spending. It doesn’t offer the protection of a credit card, but it still limits your risk, as long as you don’t put all your money on it. Even using cash — if your cash is stolen, that’s not cool, but at least it’s not your entire bank account.

And for people who still want to use debit cards or can’t get a credit card?

Check your accounts every single day. If you see anything suspicious, just call the bank. If you don’t report it … it could do a lot of damage. Minimize your risk: Don’t write your PIN down anywhere, don’t share your debit card PIN with anyone, don’t let anyone use your card. If you didn’t take the right steps (to protect your card) … if someone takes your card out of your dorm room and you didn’t lock it, you could be responsible (for unauthorized purchases).

We’ll discuss credit cards, debit cards and prepaid cards for college students in our Twitter chat on Thursday, Aug. 18 at 3 p.m. EDT, using the hashtag #AskClark. You can send us (@CreditExperts) or the Clark.com team (@ClarkHoward) questions in advance on Twitter, ask in the comments or email smadmin@credit.com.

Image: Christopher Futcher

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