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When you open a new checking account, your bank is likely going to offer you a debit card, also known as a check card. These types of cards offer you added flexibility when paying for purchases.

Conventional ATM cards only permit you to withdraw cash or perform other basic transactions at automated teller machines. With debit cards, you can perform all of the same functions as an ATM card, but you can also use the card to pay for purchases in stores. The money is directly taken directly from your checking account. Debit cards do not offer the 'pay later' option that credit cards do.

PIN versus signature
Debit cards will either require a signature or a personal identification number, or PIN. A direct debit, or PIN-based card almost immediately removes the purchase price from your checking account. These debit cards are usually accepted at gas stations, drug stores, supermarkets, and superstores such as Target.

A deferred or signature-based debit card has a MasterCard or Visa logo and is accepted anywhere MasterCard and Visa are accepted. Similar with a credit card, you hand the sales clerk your card, sign the sales slip and you are finished! It will typically take two or three days for the purchase price to be removed from your account.

Both types of debit cards are offered by most banks. Some even enable both debit functions on the same card. So, when you swipe your card when making a purchase, the salesperson will inquire if you would like to pay with credit or debit. If 'credit' is chosen, all you have to do is sign the sales receipt. If you choose, 'debit', you will need to enter your PIN.

Identity-theft protection
Being that PIN-based cards require users to enter a personal identification number, they offer more protection from identity theft. Anyone can pick up and use a signature-based debit card.

If a thief uses your card without your consent, you have some federal protection, but you must act fast. If you notify your bank within two business days of discovering that your card is missing, you are only liable for up to $50. If you wait longer than two days, you may be liable for $500. It is important to note that both MasterCard and Visa have a 'zero liability' if your card is used fraudulently. However, this guarantee is good only if the purchase transaction is processed over their networks. If not, the liability terms will then be set by the institution that issued your card, and those terms would be equal to, or better than, the terms recognized under the EFTA.

Hidden fees
Debit card typically have fees associated with them. Some banks will charge a fee every time you use your PIN for a purchase instead of signing, others charge a fee for each transaction and/or a monthly a fee for use.

Another possible issue that may arise with debit card use occurs when trying to make returns. You may have a hard time getting a refund for merchandise, being that retailers typically treat debit card purchases the same as cash or a personal check. You may end up with a store credit instead of a refund.

When using a credit card for purchases, you have the choice of withholding payment if you are not content with your purchase. The Fair Credit Billing Act protects this right, but does not apply to purchases made with debit cards. A good idea would be use debit cards when making small items and credit cards for large ticket purchases.

Using a credit card when buying online is also a good idea because you have more rights during a dispute with credit cards.

Avoid overdraft
When using a debit card it is very simple to overdraw your checking account. When you write a check, you have the register right there to enter the transaction. However, when you use a debit card, you have to rely on your memory to subtract the purchase later. You should look to develop some sort of system of placing receipts in a place that will help remind you to update your checking account register.



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