Fifth Third bank has debuted a hybrid credit-debit card called Duo, which is linked to both a checking account and a line of credit. But beware: Using the card could be costly.
Here’s how it works: Cardholders can choose the “debit” option when making a purchase, which withdraws money from a checking account, or they can choose “credit” and sign for their purchase, which deducts from a line of credit with Fifth Third. Being able to get both options on one card is handy, and if someone steals the card and uses it fraudulently for non-PIN transactions, the money in your checking account is protected.
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Cardholders do need to keep a few things in mind, though: First, if there’s no option for you to key in your PIN (such as with an online purchase), the card automatically functions as a credit card. If that happens several times over the course of a month, those accumulated charges could sneak up on you and leave you saddled with a big balance. If you withdraw cash from an ATM using the “credit” option, the transaction gets treated like a cash advance — accruing interest immediately at around 25 percent.
The card also has a potentially expensive kind of overdraft protection. If you go to make a debit purchase and you don’t have enough money in your checking account, the card is set up to automatically switch to credit mode and take the funds from your available credit limit. According to a Fifth Third spokesperson, a cardholder can opt out of this, but the default setting is to use your line of credit to complete the purchase. “I think that’s an interesting way to skirt the current requirements to get people to opt into overdraft,” says Ruth Susswein, deputy director of national priorities for advocacy group Consumer Action.
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Also, there is no alert at the point of sale to let a consumer know that their account is on empty and that they’re actually paying with a line of credit and accruing debt. If you don’t monitor your account frequently, you might not know you’ve been running up debt until you get your statement. “I would caution people to be extremely careful that they have enough money in their checking account,” says Susswein. “They can end up with a debt they never planned on and maybe can’t afford.” At APRs ranging from 12.99 to 23.99 percent, that could be a costly mistake.