Debit cards often apply their exchange rate when converting foreign currency transactions into your home currency. These exchange rates may not be as favorable as market rates. Therefore, each transaction may incur additional costs.
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You can typically use a debit card when traveling in another country as long as the merchant accepts transactions from the card issuer. Debit cards are especially useful when withdrawing cash from ATMs internationally, but cash and credit cards may make more sense for other purchases abroad.
While both can be used to make purchases, only one will help you build credit. Furthermore, debit cards rarely offer the same perks as credit cards. They also offer significantly less consumer protection.
Credit cards often offer better fraud protectionWith a credit card, you're typically responsible for up to $50 of unauthorized transactions or $0 if you report the loss before the credit card is used. You could be liable for much more for unauthorized transactions on your debit card.
Here are some cons of debit cards: They have limited fraud protection. According to the Federal Trade Commission, if your debit card is stolen and you notify your bank within two days, you could be responsible for up to $50 of any fraudulent charges.
With a debit card, the money is already gone from your checking account, and you're trying to get your own money back. Debit cards are more vulnerable to fraud than credit cards, according to the Identity Theft Resource Center in California, a nonprofit consumer education organization.
Visa and MasterCard levy a 1 percent fee on international transactions, and some banks that issue those cards also tack on a currency conversion fee (additional 1–3 percent). These are similar to the fees associated with using your debit card for ATM withdrawals.