Many consumers have heard of the standard debit card account which works almost much like a regular credit card. Many people have never heard of a deferred debit card, however, which works by debiting all of the user’s charges once per month, instead of per transaction. Below are some reasons why a deferred debit card might not be as good an idea as a standard debit card.
- Less security. With a standard debit card account, many of the transactions initiated require that a personal identification number, or PIN, be entered in order to complete the payment. Thieves must learn this PIN in order to be able to use it for either a cash withdrawal or to use it for a purchase. With deferred debit cards, however, all that the user needs to do is fake the signature on a receipt. Because the merchants do not know what the true debit card holder’s signature looks like, they will not be alerted to the fact that a fake signature has just been given and therefore will finalise the purchase. In this way, deferred debit cards are much less secure than a standard debit card if they are lost or stolen.
- Greater overdraft risk. Because of the collective hold that is instigated when making a purchase with a deferred debit card account, a user can quickly lose track of how much funds they have remaining and end up exceeding their balance simply out of confusion. If this happens, the debit card user will be assessed an overdraft fee which they must pay in addition to the amount that they exceeded. For example, if a deferred debit card user who has $1,000 left on their debit card account makes several purchases, including major bills and utilities, but misjudges the amount of their total purchases, leaving their account $10 overdrawn at the end of the month, their bank will exact a $35 overdraft fee, resulting in the debit card user losing $45 that they must pay to the bank to bring their account into a positive balance. For this reason, it is always advisable for consumers who are thinking about opening a deferred debit card account to first check with their banks to see what will be charged for overdrafts and what, if any, extra fees they should keep an eye out for.