The case against using debit cards

A few days ago, one of my close friends shared a harrowing story with me regarding identity theft. The person had their checking account compromised and found themselves spending a great deal of time working closely with their bank to resolve all of the issues.

That person was not entirely sure whether everything was cleaned up, but they had fixed many of the worst transaction errors and changed their debit cards and PINs.

My response? “If I were you, I would never, ever use my debit card outside of an ATM, ever again.”

Here’s the reason: if an identity thief gets ahold of your credit card number, they just have access to your credit card account. While that can cause some minor inconveniences, it doesn’t cause any disastrous life problems.

In this situation, the worst thing that happens is that someone charges your credit card up to the limit, in which case you simply use cash from your checking account to pay for things until you resolve the situation.

On the other hand, if an identity thief gets ahold of your debit card number, they have access to your checking account. This can cause some major problems if you don’t resolve it immediately.

Here, checks can bounce, overdraft costs can occur, bills don’t get paid, and you can be completely without money at moments when you really need it.

For me, the convenience of the debit card just isn’t worth the risk. I want to minimize (or preferably eliminate) the chance that an identity thief can directly access my checking account.

So, how do I pay for things?

I try to use cash wherever possible. I vastly prefer to use cash for face-to-face transactions, for a few reasons. One, there’s no way any identity theft can occur. Two, when I support a local business with cash, they don’t have to pay the usage fees for credit card use. Whenever you use a credit card at a business, that business has to pay a fee because you used the card. Three, it provides a very visual way for my children to understand financial transactions.

I use a single credit card for other situations. I have one credit card that I use for online purchases and for situations where cash is unavailable for purchases. That credit card is tied to the retailer I use most often so I maximize the “rewards” I get for using that card.

I pay off that credit card in full each month. Whenever that credit card bill comes in, I pay the entire balance on that card. I don’t even allow a dime to sit there from month to month. Any money left on that credit card balance just costs you more money.

I want to avoid identity theft at all costs. The most effective way to do that is to minimize the places where I share sensitive identity information and, if I do share such information, it is information that can be tightly contained and separated from direct access to my money.

Be sensible with your cards and you can go a long way toward minimizing the impact identity theft can have on you.