7 smart moves for using your debit card

Hand inserting card in ATM

A debit card is a great thing to have in your wallet, but with that power and advantage comes the risk of losing a lot of dollars.

If you're not on the lookout for fees and fraud, you could end up having your account sucked dry.

Use the wrong ATM or get the wrong debit card, and you could pay a lot in fees. And if you're not careful with your PIN and card, you could be on the hook for a lot of money.

Follow our 7 smart moves for using your debit card, and you'll save yourself all sorts of aggravation.

Smart move 1. Always know your balance.

Buy something with a credit card, and you don't have to worry about the bill for weeks. Buy something with a debit card, and the money can disappear from your checking account in hours.

Use your bank's Web site and ATM machines to regularly check the balance.

Be sure to subtract any checks you've written that haven't cleared.

If you bounce a check after drawing down the account with your debit card, you'll be zinged with an insufficient funds fee from your bank and the recipient of the check.

Smart move 2. Don't opt in to overdraft protection.

Since July 1, 2010, banks will not be able to charge overdraft fees on purchases or cash withdrawals made with your debit card unless you opt in to overdraft protection.

Some banks are desperately trying to sign customers up and keep those fees rolling in by posing scary questions like, "Do you really want to risk having your purchase declined?"

But when given a clear choice between paying overdraft fees or having a transaction refused, survey after survey shows most Americans want the purchase or withdrawal declined.

Nothing makes consumers' madder than being hit with a $35 overdraft fee because they bought a $5 sandwich or double latte after accidentally overdrawing their checking account.

Smart move 3. Limit your liability to $50 if your card is lost or stolen.

The good thing about credit cards is that if your card is lost or stolen and someone racks up a bunch of charges, you won't be on the hook for more than $50.

With debit cards, the line isn't always so clear.

Under federal law, the liability for unauthorized use of your debit card depends on how quickly you report the loss.

If you report the loss within two days after you discover it missing, you'll only be held accountable for $50. But if you take more than two days to report it, you could lose up to $500.

The best banks charge nothing if you report a loss or fraudulent withdrawal within 48 hours.

Smart move 4. Protect your PIN with your life.

Four-digit PINs are the Achilles heels of debit cards.

If someone gets hold of your card and the PIN, your checking account can be drained in a flash. Most banks will eventually replace those funds, but it could be days, weeks or even months. In the meantime, you could be bouncing checks and racking up all kinds of fees.

Never write your PIN on anything you carry in your wallet. Don't pick an obvious number such as your birthday, last four digits of your Social Security number or your driver's license number.

Be careful with who could be looking when punching in your PIN. Thieves often try to scope out PINs before selecting their next target.

Smart move 5. Forget about rewards unless it's a 100% free account

Many of the top banks now have rewards programs associated with their debit cards. These are just like credit card rewards and allow you to earn cash back, gift cards or airline tickets.

Some of these, such as the Capital One Rewards Checking account, have no fees or monthly service charges. Others, however, use rewards to lure you into high-cost checking accounts where fees can quickly surpass any rewards you'll earn.

Your top priority should be an account that charges no monthly fees, no transaction fees and reasonable penalties if you screw up and overdraw your account.

Smart move 6. Avoid ATMs that don't belong to your bank.

Some banks with great free checking accounts will reimburse you for ATM fees. Most banks, however, still charge you a fee to use another bank's ATM, and the ATM will charge you as well.

It typically costs $3 to $4 when you combine both fees. Do that a few times a month, and you're throwing away a lot of money.

Also, never use unbranded ATM machines, especially those found in convenience stores. They have the highest fees and have been used in sophisticated scams to steal PINs and loot bank accounts.

When you're in a pinch, a better way to get cash is to buy something small but essential at a store. Most retailers will provide up to $50 cash back that is drawn from your account.

Smart move 7. Resist the urge to spend more.

The good thing about using a debit card is that you're spending money you actually have, not running up high-cost credit card debt.

The bad thing is that studies show consumers still spend up to 18% more when paying with a debit card rather than cash.

Treat debit card purchases just as you would with cash by keeping an eye on your balance.

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