Oak Brook (IL).September 6, 2006

Seven Debit Card Traps

•  Select "credit" vs 'debit' at checkout when using your debit card. It's the difference between “authorization hold” vs. instant money zap. It's counterintuitive but the difference can be four processing days or more.

•  Track purchases on a tyvek sleeve that covers your card. This transaction recorder helps to avoid overdraft fees when you know your balance. Free ones are available at Duck9.com/track-expenses.htm

•  Debit disputes need to be in writing. Phone dispute is easy but you reserve no rights. Dispute directly to your debit issuer and cc online (also!) via a public forum similar to CreditCard.org. Cut and paste the dispute letter “ Las Vegas coffee bean dispute ” for maximum effect.

•  Disputing bogus charges on at your own peril. US laws clearly protect you when you get ripped off with borrowed money (Credit Billing Act and Truth-in-Lending view debit cards as cash and thus offers no protection under CBA). When your cash gets ripped off (i.e. a debit transaction) you're at the mercy of the card agreement / merchant). Tip: use credit when you might need to return the item or dispute the tow truck charge.

•  Debit is off the credit bureau grid. Valuable FICO points are lost if you stay off this grid. Your credit report score can be inflated with small payments made on time. Bureaus make no distinction between $25 or 25,000 paid on time . “A debit card doesn't count nearly as much in recording on time payments with the bureaus”, says Gerri Detweiler, author of Ultimate Credit Handbook. Keep using debit especially if you have existing loans or credit cards you're trying to ratchet down.

•  Avoid debit for Internet and avoid debit for auto-pay. Expiration dates are being dropped from Internet card processors according to Larry Chiang of Duck9. Think twice before using a debit to pay for monthly anything. A credit dispute is possible and easy. A debit dispute is very difficult.

•  Turn your credit card into a debit card. Normally, a debit card draws strait from a checking account. Request a low credit line (below $1000) and set your credit card to auto pay from your checking account. You get the debt minimization of a debit and the protection of credit card. Bonus points if you track spending and have a bank that sms you an alert for when you spend $400.

Other college credit card statistics including college student charge-off rates, average credit card balances, average APRs, etc are available here.

About United College Marketing Services: UCMS sells Visa, American Express, Mastercard and Discover to college students using client sponsored “credit strategies seminars”. It was established in 1989. Its 1250 representatives go through rigorous training.

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