Department Store Debit Cards Pros & Cons


Debit Cards

As a financial coach, I’m well-prepared for the onslaught of high-pressure credit card sales pitches that seem to come EVERY time I get in the checkout lane when shopping. No, no, NO credit cards for me! I haven’t had a personal credit card in close to ten years. I’d gotten myself into plenty of trouble with credit cards in the past and it’s just better that I don’t have one. I have debit cards for two personal checking accounts and my business account, and haven’t missed having a credit card at all.

As a coupon queen, there are times when I envy the discounts and extra coupons that store credit card holders enjoy. Then I remind myself that numerous studies have shown that people spend 12 – 18% more when shopping with a credit card versus cash or a debit card.

So I was totally caught off guard at the Target checkout a month ago when the cashier said, “Would you like to apply for a Target credit or debit card?” “Oh, no thank you,” I said. “Wait… What? Did you say ‘debit card’?” Yes, that’s right! You can get the SAME benefits of having a Target credit card without going into debt and paying 22.9%. The same goes for Nordstrom. The Target and Nordstrom debit cards link to your existing checking account and have all the same discounts and rewards as the store credit card. (These cards do not replace your bank debit card, as they can only be used in that particular store.)

There are several other major retailers that have pre-paid debit cards, which are NOT linked to your personal checking account. The Kroger grocery chain has pre-paid debit cards which can be loaded at the register with cash or via direct deposit from your bank. This enrolls shoppers into their 1-2-3 Rewards Program to earn free groceries and other perks. Even Wal-Mart has a pre-paid debit card program in partnership with American Express, called Bluebird.

Is there any downside to having a store debit card? There are some possible risks to consider, but I think they can be overcome. One downside to store debit cards is that they may not have the same fraud protection as credit cards or a bank debit card with a Visa or MasterCard logo on it. You might want to open a checking account just for the purpose of having that store debit card attached to it, rather than linking it to your regular checking account. This way you can limit the amount of money that is exposed to possible fraud. However, in order for someone to use your debit card, it can ONLY be used at that store or website and the person must also have your PIN. The other downside is that it can take a few days for the debit transactions to clear, and if you don’t have enough money in your checking account when it does, you’ll be charged an insufficient funds fee. Here’s your easy solution: Keep enough money in the account to cover your purchases! The nice thing about the pre-paid cards is that you can’t over draw them.

So, will store debit cards now be the wave of the future? There’s a growing movement in personal finance to shun credit cards and be more responsible when it comes to spending, due to the teachings of people like Dave Ramsey and the state of the national economy. Only time will tell if the store debit card trend will catch on. It’s not just a benefit to the consumer. Stores benefit by paying fewer bank processing fees when the customers purchase with a store debit or credit card. Sounds like a win-win to me!

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