| f you're still carrying around wads of cash or a bulky checkbook, you might want to consider a debit card for
shopping. While there's a 50% chance you already have one, there's also a good chance that you're not familiar with its
features. What exactly are debit cards and how do they work?
Debit (or check) cards are the younger hipper siblings of ATM (automated teller machine) cards. For years consumers have been getting cash, checking balances, or making deposits with ATM cards.
You also can use your ATM card when you buy something at a store by swiping it through the merchant's machine in the checkout lane, and keying in your PIN (personal identification number). The money is deducted from your credit union accountno muss, no fuss, unless of course you're short on funds, then it's no sale.
If your card has a MasterCard or Visa logo on it, it offers all the ATM features, plus you can use it at any store that accepts those credit cards. Merchants ring up your sale just as they would a credit card purchase, you sign the slip (no need for your PIN), and you're good to go. Although most merchants still check your available balance as they do for ATM transactions, the money is debited, or deducted, from your account immediately or within two or three days.
Debit cards can help you manage your money. Let's face it, cash flies out of wallets. If you're like most people, cash-in-hand soon transfers to someone else's. Carrying a debit card instead of large amounts of cash might make you stop and think before you hand it over.
Debit cards save time. You'll love debit cards if you hate handing over a major credit card and your driver's license each time you write a check and then waiting impatiently while the clerk writes the information down, then eyes you disapprovingly for lying about your weight. If you use your debit card as an ATM card, your PIN is all the identification required. If you use it as a debit card, your signature seals the deal.
They're easier to get than credit cards. If your credit history is shaky, or you're too young to have an established credit history, debit cards give you the convenience of credit without the risk. Since the money is debited from your credit union account, you also can establish or improve your credit worthiness by using the card responsibly. Many credit unions offer them to members who open share draft/checking accounts.
They help check overspending. With a credit card, you can freely spend way more than you can afford, and you won't even have to face up to it until you get your next bill. Debit cards help keep spending sprees under control because your ability to purchase is directly linked to your ability to pay.
Easy returns. Merchants treat returning goods or canceling services purchased with a debit card as if you made the purchase with cash or a check, according to the National Consumers League, in Washington, D.C.
Watch out for fees. Some issuers and merchants may charge fees for making debit card purchases. Ask about fees and shop around for the best deal.
Dispute resolution may be stickier. According to the National Consumers League, "Using a debit card may mean you have less protection than with a credit card purchase for items which are never delivered, are defective, or were misrepresented. But, as with credit cards, you may dispute unauthorized charges or other mistakes within 60 days. You should contact the card issuer if a problem cannot be resolved with the merchant." Major credit card companies may offer consumers the same protections for non-ATM debit card purchases as credit card purchases, but, says Holly Anderson, National Consumers League communications director, it's a voluntary policy that can be stopped at any time. "We want consumers to know about their protections under federal law."
Debit cards are safe(r). Federal law limits your liability to $50 if you report the loss or theft within two business days; after that, but within 60 days, your liability can jump to $500. After 60 days, you could lose all the money that was taken from your account. Now Visa and MasterCard voluntarily offer U.S.-issued credit and debit cardholders 100% protection against fraud, upping the protection afforded by federal law. MasterCard and Visa's zero liability extends to any purchase you make using your card for purchases in a store, over the phone, or online.
You're covered as long as you have an account in good standing; you have exercised reasonable care in safeguarding your card, and you have not reported two or more unauthorized events in the past 12 months. This zero liability provision does not cover PIN-based ATM transactions.
No matter how many protections are in place, nothing replaces good old common sense. Even if you can get your money back, or won't be held liable for unauthorized use, you'll still have to deal with the hassle of winding your way through the system to get your financial affairs back in order.
Debit (or check) cards
are the younger
hipper siblings of
ATM (automated teller
Debit cards give you
of credit without
Debit cards directly link
your ability to
purchase to your
ability to pay.
Federal law limits your
debit card liability
to $50 if you report
the loss or theft within
two business days.
|© 2001 Credit Union National Association Inc.|