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Checking Accounts
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Cards
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Cards
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DEBIT CARDS
When opening a new checking
account you can be certain that
your bank is going to provide
you with a debit card. These
cards provide you with extended
flexibility when looking to make
payments for purchases via the
money in your checking account.
You can also use debit cards for
withdrawing money from ATMs
(automated teller machines). The
money is automatically,
instantly taken from your
account. These cards are not
like credit cards where you can
make purchases and pay from them
when you want.
How debit cards work
- Cards have PINS
(personal identification
numbers) that protect you from
identity theft
- If your card is lost or stolen, you are only liable for $50 worth of
fraudulent use if you report to
your bank within two days and
$500 if you report to your bank
after two days.
- You may be charged a fee when using your debit card. It would be wise to
ask your bank what the different
fees for use are.
- It is important to not overdraw your checking account when using a debit
card.
PIN vs. signature
Most debit cards are either
going to require a PIN or a
signature, or both. A debit card
that utilizes a PIN will deduct
your purchases instantly from
your checking account. The most
common establishments that
accept these types of cards are
gas stations, supermarkets, drug
stores and superstores like
Target.
A signature-based debit card
will have a MasterCard or Visa
logo. These cards can be used
anywhere Visa or MasterCards are
accepted. Similarly to using a
credit card, you give your card
to the salesperson, sign the
sales slip and that its it! It
usually will take two or three
days for the funds to be
deducted from your account.
As mentioned, it is very common
for banks to issue debit cards
with both of the above features.
If this is the case, you will be
asked if you want to use 'debit'
or 'credit' when making your
purchases.
Identity-theft protection
PIN driven cards offer slightly
more security than signature
debit cards. Only you should
know your PIN whereas anyone can
sign your name.
You are protected if your PIN
driven debit card is used
without your consent. However,
you must act fast. Under the
Electronic Fund Transfer Act,
your liability is limited to $50
if you contact your bank within
two days. If you do not, you can
potentially be liable for as
much as $500.
If your signature based debit card
is stolen, both Visa and
MasterCard offer 'zero
liability' protection. However,
this liability protection is
only good if the purchase is
processed over their networks.
If not, you will be responsible
for the amount set forth by your
card issuer. This amount would
be equal to or better than the
terms established under the
EFTA.
Hidden fees
Debit cards typically have
significant fees associated with
them. Common costs include a
a monthly fee, a fee for each
transaction or a fee every time
you use your PIN for making a
purchase.
Returns
Many retailers consider debit
card purchases the same as cash.
Therefore, you will likely be
given store credit instead of a
cash refund or credit to your
account when making returns.
When credit cards are used for
purchasing goods, you have the
choice of withholding payment if
the item is not satisfactory.
This is called the Fair Credit
Billing Act and is protected by
federal law. However, debit card
purchases are not protected
under this law. Therefore, you
should proceed with caution when
buying expensive items with a
debit card.
Also, when making purchases
online you should use a credit
card. If you have to dispute a
charge, you are going to have
more protection if you used a
credit card than if you used a
debit card.
Avoid overdraft
When using a debit card, you
always have to be conscious of
how much money you have in your
account. If you are not, there
is a very good chance that you
are going to overdraft your
account, resulting in bank fees
as well as bounced checked and
more bank fees. Develop some
sort of system that will allow
you to keep tabs on your
available funds.
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