Debit Card Facts
By Danielle DeLee, eHow Contributor
Most banks offer debit cards with their checking accounts. These cards, also called check cards or
electronic fund transfer cards, allow customers to use their cards to make transactions with funds taken
directly from their checking accounts. It is important to understand the benefits of having a debit card,
along with the limitations and risks associated with it, before agreeing to receive one.
1. Locations
o The main advantage of debit cards is their convenience. ATM cards require the customer to go
to the ATM and take out cash. Debit cards, in contrast, can be used in a variety of locations.
You can use them directly at stores, online and at ATMs. The cards are usually provided by
Visa or MasterCard. Many merchants have contracts with these companies so that they can
provide their customers with the convenience of using a debit card, so you can use your card
in many places.
Types of Transactions
o
There are four ways to use a debit card. First, like an ATM card, you can withdraw funds at an
ATM and use the cash for your purchase. Second, you can enter the information online to pay
for orders. Third, at stores, you can swipe the card and verify it with a signature. Finally, you
can use the card at stores by entering your pin number. When you use a debit card with a
signature, as you would use a credit card, the merchant pays a fee to the card provider. In
December 2010, the Fed announced new, strict limits on the maximum amounts that providers
may charge merchants.
Limitations
o
A debit card may not be used for every purchase. Some merchants do not have contracts with
some card providers, so you may have to pay in cash. Debit cards also limit the amount of
money you can spend to the money in your account; unlike credit cards, they do not extend a
credit limit. Finally, some transactions, such as reserving a rental car, require that the
customer give the company credit card information.
o
If your debit card is stolen, you are subject to different limitations of liability than if your
credit card is taken. Legally, you are liable for up to $500 if you fail to notify the bank within
48 hours of a theft. Most banks, however, will only hold you accountable for $50. If the bank
is not notified within 60 days, however, you could lose all of your money from the account
that is linked to the card. If you have a debit card that provides overdraft protection for the
account, you could also be responsible for the entire credit limit that may be extended to the
checking account.
Risks
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