Understanding Debit Cards

Debit cards are commonly used throughout the country as an alternative to paying with cash. A debit card is issued by your bank or credit union and is directly linked to your personal banking accounts.

Each time you make a purchase using your debit card, the funds will automatically be taken out of your account. Unlike credit cards, where you can use funds that you do not have available, you must have money in your bank account in order to use your debit card.

You can use your card at any location that accepts debit/credit cards, or withdraw funds from an ATM. You may be required to enter a PIN (Persona Identification Number) of sign the sales slip when you make a purchase or withdraw funds.

Each financial institution offers their own set of debit card options. It is best to sit down with a representative from your bank or credit union to see which option is best for you.

Some Things to Look Out For
Debit cards are standard today and many people already have one. However, there are some things you should look out for and extra charges you should be aware of before using your debit card.

•  Fees for Using Card. Many banks and credit unions allow you to have a set number of free withdrawals using the ATM machine. However, if you go over this limit, you may encounter a fee each time you withdraw funds using your debit card. You may also be charged a fee for using an ATM machine that is not operated by your bank or credit union.

•  Overdraw Fees. Some banks and credit cards will allow you to spend slightly more money than you have in your account. This works similar to a line-of-credit. The bank, as a courtesy, will cover some of your charges if they go over your current balance in your account. However, the charge a hefty overdraw fee for this courtesy. On the one hand, this would avoid the risk of having your card denied if you go slightly over, but on the other hand, you are paying a high fee if you ever use this service.

•  Dual Purpose Card. Financial institutions also offer dual purpose cards, where you can decide if you want your purchase to be made with your debit or credit card. If you select debit, the funds will come out of your bank account. If you choose credit, it will be charged to your credit card and interest will be applied. Oftentimes, the interest on these dual purpose cards are much higher than the interest you would see other credit cards. Be certain that you ask what type of card you have when setting up your account.

Security of Your Card
One of the major concern consumers have with using their debit card is the risk of identity theft. It is important that you protect your card at all time. When shopping online, you want to only use secure sites. You may want to consider using a prepaid card when shopping online or travelling outside of the country. Also, be sure to monitor your account and notify your financial institution immediately if you detect any unauthorized purchases.

Chargebacks
Sometimes when you are making a purchase an error occurs, such as you are overcharged or you do not receive the goods or services promised. When this happens, you have chargeback rights that will allow you to get your money back. You should immediately contact the company that made the error to see if they will refund your money. If they are not cooperative, you should then contact your financial institution and ask them to refund your money. Refer to the specific terms and conditions of your account to learn how to work through this process. Keep in mind, that some payments, like ones made to BPAY are non-refundable.

Image courtesy of ddpavumba / FreeDigitalPhotos.net