What is your bank not telling you about using your debit card?

Ralph Estep Jr.:
00:00

Let me start with what I'll consider a provocative question today, and that's, what's the one thing that you think your bank doesn't want you to know about your debit card? Imagine this waking up one morning to find that your bank account is completely drained. I'm going to tell a story today that happened to one of my clients, and why it happened is just might surprise you. So today we're going to dive deep into the world of debit cards. We're going to talk about credit cards, and we're going to talk about some financial choices that can make or break your security. Well, stay tuned to find out how this hidden secret could be costing you 1000s.

Ralph Estep Jr.:
00:39

Let's get started by talking about yesterday's show. On yesterday's show, we talked about taming your tongue. I think it was a great discussion about how to really bring the words you use, the things you say, into alignment as always. You can find all of our past episodes at askralph.com and guess what? We are closing in on over 500 episodes.

Ralph Estep Jr.:
01:04

Let's get into today's topic. I received a message from Stephanie. She comes to us from Chicago, and she writes this, "Dear Ralph, I've always used my debit card for everything, thinking it was the responsible way to manage my money. I was always told that if I didn't have the money, I should not buy it. But recently, a friend told me I should be using a credit card instead. He said I could lose all of my money, and besides that, I could be earning a huge amount in credit card rewards. I'm confused and worried. Am I putting myself at risk using my debit card? What should I do?"

Ralph Estep Jr.:
01:36

Well, Stephanie, let me start by saying thank you for your question. It's a question I actually get pretty common in my financial consulting practice, and I appreciate your reaching out. The goal today is to balance wise financial stewardship with security.

Ralph Estep Jr.:
01:53

Well, welcome to the Ask Ralph show where my goal is to master your finances from a Christian perspective. I'm your host, Ralph Estep Jr, and I am thrilled you join me, and I appreciate the time that you're investing in my show. My goal is truly to help you achieve financial freedom and grow in your faith. One of the ways you can do that is you can go to askralph.com, and join our community. I give away a book out there. You can get it, this book right here. It's called Mastering Your Finances. Now, if you were to buy this book on Amazon, it will cost you 10 bucks, but if you go to the website, you join our email list. I'll send it to you absolutely free.

Ralph Estep Jr.:
02:26

The other thing I want to say to you right now is, if you're getting value from the show, do me a favor and please share it with your friends. Another thing I'm going to ask you to do is send your questions. My whole goal to Ask Ralph Show. It's why we call it ask Ralph is because I want you to ask me questions, so you can send those questions to my email. That's ralph@askralph.com or visit our website. That's at askralph.com you'll see a little microphone icon at the bottom. Click on it and tell me what's on your mind. know, I always like to get things started with a verse from the Bible to help ground us in our faith.

Ralph Estep Jr.:
03:01

This one comes from the Book of Luke Chapter 16, verse 11, and it says this, "So if you have not been trustworthy in handling worldly wealth, who will trust you with true riches?" That's a powerful verse, and it reminds us of the importance of being wise stewards of our financial resources. Part of that includes protecting ourselves from potential risks and fraud. Well, now let's address the elephant in the room. What is your bank not telling you about your debit card?

Ralph Estep Jr.:
03:34

The truth is that little piece of plastic in your wallet might be putting your entire financial life at risk. Let me tell you a story. I'm going to tell you a story about a client named client named John. Now listen, when I talk about clients in the show, I never use the client's real name, so if you hear me say the word John or Sally or Susie, that's because I'm using it. But let's just call this guy John. Now John was a responsible guy, hardworking small business owner. This dude paid his bills on time. He never missed a beat. He kept a close eye on his finances, and he used his debit card for every single thing, because he didn't want to get into that place of having debt.

Ralph Estep Jr.:
04:08

He wanted to stay on top of spending. And to be honest with you, was great for us as His accounting firm, made my life a lot easier, because every single transaction was right there on his debit card. So I saw it on his statement. He was easy to take care of his books. Well, let me tell you what happened. So one Monday morning, John calls me in a panic. I mean, he was freaking out over the weekend, his bank account had become completely drained. Now, first he tells me, Oh, I thought I made a mistake.

Ralph Estep Jr.:
04:35

Maybe I, you know, I didn't realize I had checks outstanding. But when he, when he looked at his transactions, he slowly figured out that it was fraud. When he looked back at it, he finally was able to put two and two together, and he remembered he had bought gas on that Friday, and what ended up happening as he, they put the skimmer device at a gas station. This is one of the big deals, and I'll talk about this a little bit later in the show, but they put this skimming device and they captured his debit card information. And in 48 hours, listen to this,

Ralph Estep Jr.:
05:04

In 48 hours, they had stolen $15,000 he had absolutely nothing in his account. And think about this. This is his small business. He was crushed. It impacted his small business because he was business account. He didn't have anything to turn to now you might be thinking, but Ralph, surely the bank will cover those fraudulent charges, right? Well, not so fast. It's where things get tricky. This is thing you need to understand. With a debit card, your protection against fraud is much weaker than using a credit card. And this is key.

Ralph Estep Jr.:
05:36

You got to hear me on this. It is not as simple with a debit card, as it is a credit card. So let's talk about what's called the Electronic Funds Transfer Act. I'm going to put a link to that in the show notes. There's a PDF that you can access that tells you all about it. Now, this Electronic Fund Transfer Act, it limits your liability for these fraudulent debit card transactions. But here's the key to this whole thing, the protection depends on how quickly you report the fraud. So if you report the referral within two business days, they cap your liability at 50 bucks.

Ralph Estep Jr.:
06:08

But if you wait longer, you could be on the hook for $500 or more. And here's the thing a lot of people don't realize. If you don't notice it for more than 60 days after your statement is sent, you could be liable for all the money taken from your accounts, what they call you've got to check your statement, and they want you to do it within a reasonable amount of time.

Ralph Estep Jr.:
06:26

So basically, if you haven't looked at your statement for 60 days, they can tell you, "Hey, too bad." So think about John. John's fraud happened over a weekend. He didn't even notice it until Monday. I mean, maybe he was out doing things on his you know, with his family and all that kind of stuff. So two business days at pace. Well, guess what?

Ralph Estep Jr.:
06:42

Even the best scenario, John lost $500 and that's not to mention the stress and the hassle of dealing with that fraud. And think about this, a lot of people have a lot of things set up for automatic payment. Well, once he had to figure this out, they had to replace his card, he had to go through and set up all of those things again. But here's the real kicker, while John was fighting again, his money back. He couldn't pay his mortgage, he couldn't pay his employees, he couldn't pay his suppliers. His entire life, and business were thrown into chaos because of one compromised debit card.

Ralph Estep Jr.:
07:17

Well, let's talk about my other client. Let's call him Mike. Now. Mike, on the other hand, used this credit card for all his purchase, you know, and if there was ever an issue with a suspicious charge, all he had to do is pick up the phone and call his credit card company, and they reversed it immediately. Many of you may have gone through this as well. You see something weird on your statement, or maybe you've got alerts set up, and you get this strange charge. He just called a credit card company. You don't lose any money. There's really no stress, and most credit card companies will even overnight you a new card.

Ralph Estep Jr.:
07:48

Now that said, you still have to go and set up all those auto items. Again, you're not going to get around that. But here's why Mike's story is so much better than John's. So Mike learned to use his credit card responsibly. He paid off his statement balance each and every month. He never paid interest, and Mike used it for all his business purchases. And guess what? He told me, in one year and I sold on his statements, he had earned $3,000 back in cash rewards just by putting all his business purchases on it. So let's cut to the chase.

Ralph Estep Jr.:
08:23

What are the pros and cons of using a debit card? Let me break it down for you. Here's the pros of using a debit card, and there are some pros. It's linked directly to your checking account, which you know it's going to help you avoid overspending, because, listen, if you don't have the money, you can't spend it. The other nice thing about debit cards is there's usually no annual fee. It's something that your bank or credit union or other financial institution, offers. And probably the biggest thing about is you can withdraw cash from ATMs without incurring any cash advance fees, like you do on a credit card.

Ralph Estep Jr.:
08:51

But here's the dark side, here's the cons of using a debit card. We've talked about this. You've got limited fraud protection compared to credit cards. With that credit card, the money isn't coming out of your account right away, so you have the ability to call that credit card company say, "Yo, wait a minute, dude, I didn't go to, you know, Tahiti and buy this stuff. This isn't me." The other cool thing about, you know, the downside of debit cards is there's potential overdraft fees if you're not careful with your balance.

Ralph Estep Jr.:
09:17

You know, maybe you're intentional. Maybe you're not even getting any fraud on your account, but you overdraft your account because you're not paying attention. Why I wrote a check? You know you didn't realize that was come out, so you might hit it with those overdraft fees. Another thing about debit cards a lot of people don't consider is it doesn't help you at all build your credit history, whereas a credit card will do that.

Ralph Estep Jr.:
09:36

Most debit cards don't have any rewards or cash back programs like credit cards, and it holds your account for certain transactions. I don't know if you've ever been through this. I have. I know there was a time in my life when all I had was a debit card. So if I went to rent a car, it held like $500 or I did a hotel state, it held a couple $100 and here's another thing you need to understand when it comes to fraud protection with a debit card.

Ralph Estep Jr.:
09:58

Here's what you need to know. This is the bottom line. Number one, your liability depends on how quickly you report to fraud, like we talked about in John's case, it was over a weekend. It started on Friday, on Saturday and Sunday. So he was liable for that $500 because it took us several days for him to figure it out. The other thing you're going to have to do, number two, you might have to fight to get your money back, and in the meantime, your account is empty, like we talked about with John, he couldn't pay his mortgage, he couldn't pay his employees, he couldn't pay suppliers. That is a massive issue.

Ralph Estep Jr.:
10:29

And the biggest thing number three, as it relates to fraud, there is no buffer between fraudsters and your actual bank account. Hey, you're giving them the keys to the vault and saying, Come right in now, listen, I'm going to put an article out in the show notes. It comes from bank rate, and it talks about where you should never use a debit card. I'm not going to get into it on the show, but you can go check that out. It's a good thing to take a look at. So you might say, Ralph, what should I do? I always like to give you actionable steps, and here they are.

Ralph Estep Jr.:
10:58

Number one, consider using a credit card for most of your purchases now, especially those online or places where your card information could be compromised. You know, one of the big ones is gas station. These skimming devices are no joke. Or restaurants. Think about it. The waitress brings up your bill at the end of the meal. Says, "Oh, Mr. Ralph, how do you want to pay for this? Oh, here's my credit card. What do they do? They put it one of those little black, full things, and they go off with it." You don't think there's an opportunity for fraud there if you're at a restaurant.

Ralph Estep Jr.:
11:24

Now, one of the things a lot of restaurants are doing, which I think is really kind of cool, is they're bringing these things. I think it's called toast, and they actually bring it to the table. So you actually do your credit card, you know, tapping or swiping right there. Number two thing, action item. If you do use your debit card, set up alerts on your bank account for any transactions. That might seem silly, but most banks now, look, they want to prevent fraud too, because they don't want to lose any money.

Ralph Estep Jr.:
11:46

They don't mind if you lose a little bit, but they don't want to lose any at all. So set up those account transactions, those alerts. I do the same thing with my credit card. Sometimes I'll say to my wife, Hey, did you do such and such? Oh, yeah. I was like, she's like, why are you asking them? It's because I just got an alert. And here's another thing we talked about with with John's case, you got to check your account regularly. Now he checked it on Monday. I don't think that's unreasonable to not check it all weekend.

Ralph Estep Jr.:
12:10

But listen, I've got more and more clients and customers who look at their bank account on a daily basis. Just skim through it, see if it makes sense. And here's another big one, never use your debit card for online purchases or an unfamiliar ATM machine. A lot of people don't realize this. These ATMs are all over the place. You might find them in little convenience stores and all that kind of stuff, but you don't know is there a skimming device on there that's going to steal your information and listen, never, ever, I mean, never use your debit card for an online purchase. Another thing I'm going to recommend, and a lot of people don't like when I say this, but it's a two fold thing, and that's keep a small amount in your checking account and transfer money as needed.

Ralph Estep Jr.:
12:48

That's one of the things that I do. Even in my business account, I don't keep a lot of cash in that. I might have a money market account or something like this. So it's twofold. Number one, it's preventing that fraud. And the second thing it's doing, it's helping my money grow. Remember using a credit card responsibly. Now that means paying it off the balance in full each month can provide better protection than that debit card and even give you some financial benefits to rewards like we talked about. Look at what Mike did. He used his credit card responsibly, paid that off every month.

Ralph Estep Jr.:
13:16

He never incurred any interest charges, and he got a whopping three grand back over the year. So let me wrap things up. Your debit card might seem like a safe, responsible choice, but it could be putting your finances at risk. You got to understand the pros and cons and start taking steps to better protect yourself. You can make smarter decisions about when and how to use your debit card.

Ralph Estep Jr.:
13:38

Well, let me talk about what's going up on tomorrow's show. Tomorrow's our technology Tuesday show. We're going to talk about VPNs, that's a virtual private network. We're going to talk about how they work and why it's useful in today's digital age, protecting your online information, just as we talked about today, is just as important as protecting your physical wallets. You don't want to miss it.

Ralph Estep Jr.:
13:57

Now, before I close out, I want to say this, if you're feeling overwhelmed by all this financial information, don't worry. I'm here to help you. I can help coach you. If you've got issues going on with your personal financial situation, or how about your business situation, you're looking for ways to grow your personal finances, or maybe you need to recover from difficult times you've been through.

Ralph Estep Jr.:
14:18

If you're looking for ways to grow your business. This is what I do. This is my expert mission field. I'm going to encourage you to schedule a consultation with me. I charge $150 you can do that right at askralphpodcast.com/store, and let me create a personalized plan to help you manage your finances safely, grow your business, whatever that looks like for you.

Ralph Estep Jr.:
14:39

Remember, my passion is to help you achieve financial success. I want you to live out your dreams, and I want you to do that by growing in your faith. The truth is, together, we can master your finances from a Christian perspective. So as I always say, I want you to stay financially savvy, and may God bless you abundantly.