If credit cards
mean “pay later,” debit cards mean “pay now.” These cards are tied to your bank account and using them is like paying
with cash or a check. With debit cards, you must have money in your account to cover your
purchases. These cards look similar to credit
cards so make sure you are using the correct card.
KNOW YOUR LIMITS
Many debit cards
have daily spending and cash withdrawal limits. These limits are meant to protect
you in case your card is stolen. But
remember, your card might be declined if you exceed your limits even if you
have enough money in your account. Know
your limits and contact your lender if you need to raise or lower amounts.
Also remember to
track your spending. When you make a purchase, withdraw money from your account
or pay bills that exceed your account
balance, you may be subject to “overdraft fees.” Some financial institutions
offer overdraft protection and if you've
signed up for it, they’ll cover your check or debit transaction so it doesn’t
bounce. But this protection often comes
at a price: you may be charged a fee for each purchase that uses overdraft.
Balance your account regularly to avoid added fees.
DEBIT CARDS — THE EXTRA PROTECTIONS
ZERO LIABILITY This generally
means you’re not liable for unauthorized purchases made on your debit card as
long as you notify your financial institution immediately. Check with your
financial institution to make sure Zero
Liability applies to your card.
FUNDS AND FRAUD Federal law mandates
that financial institutions replace funds for losses resulting from fraudulent
card use within ten business days of
notification. However, in many cases, you’ll have access to funds within five business days of notification
– sometimes sooner.
THE RIGHT TO DISPUTE You may have
dispute resolution options should an issue arise with a debit card purchase. This often applies to signed
purchases only. Check with your card issuer, and save all of your receipts.
Using Debit Cards
In recent years
debit cards have risen in popularity, often replacing payment by cash and
check. A debit card is unlike a credit
card in that it is tied directly to a checking account. When you make a
purchase with a credit card, you are
essentially taking out a loan of money from the card issuer, whereas a debit
card purchase withdraws money directly from your checking account. There are of
course benefits to each method. Credit card users who pay off their bill each
month benefit from a free loan of money.
On the other hand, consumers concerned
with debt load can limit their spending by using debit cards, which only allow them to
spend only as much as they have in their
checking account. Because your debit card is tied to your bank account, there are specific considerations and
precautions to keep in mind when using
them.
Stay in Check
Always know your
current bank account balance and available
funds. And don’t forget about checks that haven’t cleared your account.
Consider opening
an online bank account that allows you
to manage debit card purchases, checks and bill paying all at once. You’ll have a one-stop
shop for managing all the ins and outs
of your account.
When Using a Debit Card,
Don't Forget to:
v Keep sales and ATM receipts or copies.
v Record your transactions in your check
register as soon as possible or check
transactions online.
v Remember to account for any bank fees that may
apply.
v Review statements carefully. If you suspect a mistake
or fraudulent use, call your financial institution immediately.
Stop Surcharges
Many banks
charge a fee if you use another institution’s ATM with your debit card. Instead
of paying extra, choose a bank or credit union with ATMs convenient to where
you live and work or that are part of a surcharge-free network;
use your debit
card to get cash back when making
purchases. Also consider using your
debit card to get cash back when making purchases.
Be Secure
For maximum
security, take advantage of free alerts for
your debit card. Some financial institutions offer automatic alerts by phone, text message or
email.
RECEIVE CUSTOMIZED ALERTS WHEN:
v ATM withdrawals
or any debit card activity exceeds your set limits
v Your online ID or passwords change
v Large transactions are made
Keep a Secret
v Your debit card
will require a Personal Identification Number (PIN) for security. Choose a
unique number.
v Avoid obvious
choices like your address, phone number or birth date.
v Always keep your
PIN private. Memorize it. Don’t write it down anywhere. And never tell it to
anyone.
v If you feel your
PIN has been compromised or someone may
have identified it, change your number immediately
by contacting your financial institution.
Hit the Road, Plan Ahead
Like credit
cards, debit cards are accepted at millions of locations worldwide. For your protection,
your financial institution may place an
alert on your account if the card is
used out-of-state or in a foreign country, or if the transaction falls outside your
normal spending patterns. If possible,
let your bank know your travel plans in advance.
Know When A Hold Has Been Placed
Sometimes, when
you use your debit card for a credit-type
transaction your bank or credit union may place a temporary hold on your account until
the transaction has been completed. For
example, if you use your debit card to reserve a hotel room, funds sufficient to cover the length of your stay
will be “held,” even though the money
isn’t actually deducted from your
account until the final bill is settled
– for example, until room service and phone charges can be calculated. Many people use a
credit card in these situations so they
don’t tie up their checking account balance.
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