Disadvantages of Digital Payments: Debit and Credit Cards

     In a previous post, we pointed out the advantages of using debit and cards cards. Here, we'll be illustrating to you the opposite: the drawbacks of having a debit or a credit card.

Main Disadvantages of Debit Cards

     One of the disadvantages of using a debit card is that, although there are no monthly fees or interest rates, if you withdraw more than what is available in your bank account, you will be charged an overdraft fee. The amount of the fee depends on the bank, however, studies show that the range is usually between $10 to $40.
     A second disadvantage of debit cards is that it is relatively harder to get your money back from the bank once your card is stolen or used by someone else. The protections on debit cards are not as strong as they are on credit cards. Usually banks will take a very long time to process your claim and refund your money than a credit card issuer would. This is mainly because of the high credit limits on credit cards that can reach more than $100,000 for certain credit card users.

     Finally, a third drawback of debit cards is high liability issues. At certain times, if your debit card is stolen and the money is gone, you could be the person legally responsable and liable for all the costs. This causes great tension for people who are using debit cards because it makes them feel that their own bank won't always be on their side. Credit card holders usually feel more secure about this matter because the issuer will refund them in a relatively short time and spare them much of the prolonged security procedures.




Main Disadvantages of Credit Cards

     One of the disadvantages of using a credit card is the applied interest rates on any unpaid credit card bills you have. If you are late on the payment and the amount was not paid by the end of the month, the fee will increase. And one of the important things credit card users should always be careful about is credit card debt. It can accumulate relatively quickly.

     Another disadvantage of credit cards is the process of the investigation on your credit history. These investigations are very thorough and are quite a hassle. If the issuer is suspicious about the person's financial state, the investigation can last for months. Credit card companies lose a lot of money because of fraud, therefore, they always want to detect and minimize the risk of fraud before it actually happens.
     The third drawback of credit cards is that the limit on their account is usually very high. Therefore, people can easily end up spending a lot of money and go over their limit. When next month's bill is due and the person can't pay the amount, fees will increase and this brings us back again to accumulated debt.



Sources:

Bruce, Laura. "FDIC Study: Outrageous Overdraft Fees." FDIC Study: Outrageous Overdraft Fees. Bankrate, Inc., n.d. Web. 12 June 2013. Retrieved from: http://www.bankrate.com/finance/investing/fdic-study-outrageous-overdraft-fees-1.aspx

Sherman, Fraser. "How Do Credit Card Companies Investigate Fraud? | EHow." EHow. Demand Media, 27 May 2011. Web. 12 June 2013. Retrieved from: 

http://www.ehow.com/info_8498724_do-card-companies-investigate-fraud.html

Barrymore, John. "How Debit Cards Work." HowStuffWorks. HowStuffWorks, LLC, n.d. Web. 06 June 2013. Retrieved from: http://www.howstuffworks.com/debit-cards.htm

"Credit or Debit: The Choice Is Yours." Debit Card vs Credit Card: Risks and Benefits. Privacy Matters, n.d. Web. 06 June 2013. Retrieved from:
http://www.privacymatters.com/credit-information/credit-cards-vs-debit-cards.aspx

"Common Problems: Credit Card Debt." Baehr Law Firm. The Baehr Law Firm, PC., n.d. Web. 06 June 2013. Retrieved from: http://www.baehrlaw.com/problems/credit_card_debt.asp