1) How to Use Debit Cards
Debit cards have been in use for the last twenty years. If you still don't use one yet, after reading this article, you may want to get one for yourself.
One of the very obvious advantages of using debit cards is that eliminates the need to write checks. For people on the go (those who value greatly every seconds), debit cards are their next best friends. In times when we are in a hurry, we can just swipe our debit cards and payments are done. Another advantage of debit cards is that payments are made easy and hassle-free.
Debit cards, or also known as electronic checks, can be used to pay for products purchased online. They make online shopping very convenient. So the next time you shop online you can feel confident making a secure purchase. You can be notified through email about any transactions made through your account. You will receive a text message once payments are made. This new feature of debit cards is very a helpful one.
If you have a checking or savings account you can contact your bank about a debit card. Most of the time, banks can issue the cards as soon as you open a checking or savings account or they can just send you your card through mail. All transactions and payments made using your card will be credited to your checking account. After you receive your debit card you'll need to follow the instructions on the back of the card to.
Most banks issue debit cards. The very first bank to do this is the First National Bank in Seattle. They have been of existence since 1978 when the First National Bank of Seattle issued debit cards to their clients, mostly business executives, with large savings account. Since then, US banks such as HSBC, Bank of America, Citigroup, Wells Fargo, Citizens Bank and many more have been issuing debit cards.
It is also because of technology that there have been a growing number of fraudulent activities or uses of debit cards. The best thing to do is never share your PIN with anyone. It is better to be safe than sorry in the end. People who contact you by email or phone and ask for your PIN number need to be carefully screened. Do not ever give your PIN to these people. There have been a growing number of phishing scams, so beware. Another tip to avoid fraudulent use of debit cards is don't write down your card PIN on your debit card. There are people who do this (those who can't remember their PINs). Do not be one of them.
With the fast advancement of technology, who knows how these cards will be used in a year or so. Surely, they are very useful and advantageous. Once you fully understand how these debit cards work and what their uses are, you will feel more comfortable using them.
2) More about Using a Debit Card
Just the name "debit card" can seem confusing. Is it something you can use like a credit card? Is it something you use to take cash out of an account like an ATM card? Using debit cards wisely involves knowing what they are, how they work and then thinking carefully about how to use them as part of your overall financial plan.
What is a Debit Card?
In the 1980s banks began to issue ATM (automated teller machine) cards to customers. These cards enabled customers to withdraw money directly from their account at ATM machines. Over time banks wanted to offer customers more features with the same ATM card, like the ability to make purchases directly linked to a specified account. Thus the creation of the debit card. The best way to think about debit cards is to consider them as a combination ATM card and checkbook.
Debit cards are linked to a specific account – typically they are linked to your checking account, but you should talk with your bank to verify which account the card will be linked to. When you make a purchase with a debit card it automatically deducts that amount from the account linked to the card, in the same way that when a check is cashed the amount is immediately deducted from your account. So, for example, if you purchase $89 worth of groceries from the supermarket and put it on your debt card it will show up as an $89 POS (point of sale) transaction or withdrawal from your account. Debit cards are unlike credit cards because they have a fixed limit (your bank account balance) and, because you're using your own money and not borrowing from a credit company, you don't have to pay interest when using a debit card the way you do if you charge something on a credit card and carry a balance. You can also withdraw money directly out of your own account when you use a debit card and the funds are automatically deducted from that balance.
When Should You Use a Debit Card?
Debit cards can help you maintain financial discipline. Instead of using, and potentially racking up significant, ongoing credit card debt, consider using a debit card. The fact that the purchase will be automatically deducted from your account may force you to think twice about a purchase…or at least determine that you have enough money in your account to pay for what you want to buy so that your card is not declined.
If you have an uneven credit card record (meaning you have maintained high balances, not paid on time or defaulted on the account), you may want to consider strictly using your debit card rather than your credit card for a certain period of time. Proving that you have used a debit card responsibly and maintained an account balance can help in re-establishing or shoring up your credit rating. While debit card transactions are not reported to credit bureaus (like credit card activity is), you can use the monthly bank account statement for the account that is linked to your debit card to prove to creditors you have improved your ability to manage your spending and payment habits.
Often parents of college-age children choose to give their children debit cards for purchases instead of a credit card. Debit cards can be a useful tool to help students learn how purchases and payments add up and how to pace their spending to keep within the balance of the funds in their account.
Making Purchases with a Debit Card
Most stores, gas stations, restaurants and other locations accept debit cards for payment. Ask the cashier or clerk if the store accepts debit card. If so, making a purchase or a payment (i.e. for car repair, meal at a restaurant, etc.) with a debit card is fairly simple:
1. The clerk or cashier will swipe your card in the same way he or she would swipe a credit card for payment. If the cashier doesn't ask, make sure to tell him or her that you are using a debit card.
2. The cashier will then enter the amount of your purchase, which you should see on a PIN (personal identification number) pad or station. The PIN machine will ask you to enter your 4-digit identification number and to verify the amount that is being debited from your account for the purchase. Some retailers will give you the option of withdrawing additional money above the cost of the purchase – to have extra cash on hand--say $10 or $20. If you choose that option then you will be asked to verify the final total transaction amount (including the cash back that you requested) and then the request will be sent to your bank.
3. The cashier will then get an approval code from your bank, which tells him or her that the transaction was approved, meaning that you have enough money in your account to pay for the purchase.
4. Once your purchase is approved the bank "holds" that amount of money in your account to process and send funds to the retailer where you made your purchase. It's important for you to know that the funds are held from your account, because if the transaction is incorrect and the cashier goes to "void" it out, those funds will still be held in your account until the transaction is verified with the store. So if there is an error with the transaction ask the cashier to do a "sale return" instead of voiding it out. That way the exact amount of the transaction will be credited back to your account and those funds will not be held by your bank. Then the cashier can process it as a new transaction with the final, correct amount to be deducted from your account.
5. Your monthly bank statement will list each debit card transaction directly on your account statement in the same way that checks are listed (for checking accounts) or withdrawals.
Questions to Ask Before Obtaining a Debit Card:
· Is there an annual fee for using the card?
· What account is this card linked to? You want to know which account the card will deduct money from when making purchases or payments – i.e. your savings account, checking account, money market account, etc.
· Is there a fee for using my debit card to withdraw money with the card from another bank's ATM?
· What happens if I lose the card? Who should I notify? Because your debit card is directly linked to your chosen account, a thief can possibly tamper with your savings or checking balance directly using your card. Under the Electronic Fund Transactions Act, you are only liable for $50 (i.e your account will still show a $50 loss) if you report your card missing within 2 days. Between 2 and 60 days you may be responsible for up to $500 of the funds used from your account (meaning your account will show up to a $500 loss) and if you wait longer than 60 days none of the amount stolen from your account will be refunded by the bank. Know exactly how your bank wants you to report a loss to resolve the issue quickly and to limit your liability.
· What happens if there is a discrepancy on my bank statement related to a debit card purchase or payment?
Using a debit card can be a great way to track and maintain control over your spending without racking up credit card debt at high interest rates. Take the time to ask a few questions at your bank to understand how their debit card services work and consider using the debit card as a financial tool to manage your finances wisely.