What is a Debit Card?

Debit cards are very similar to credit cards in that they can be used to withdraw cash from ATMs and make purchases at millions of locations worldwide just as with a regular Visa or MasterCard.  The major difference is that amounts used for purchases with your debit card are immediately deducted from your checking account.  Merchants prefer them over checks because they don't bounce and the money is transferred quickly.

The biggest advantage of debit cards is convenience.  Not only do you not have to carry cash, you don't run up interest charges like you would with a credit card. For this reason, debit cards are a good option for those who have gotten into trouble with credit cards in the past.  They certainly will reign in uncontrolled spending, since purchase amounts are immediately deduced from one's bank account, and one can keep track of spending and expenses.

The major disadvantage of using debit cards is that they might not afford you the financial protection that credit cards do as regards fraud.  If your credit card is stolen, you will only be required to pay $50.00, if you must pay anything at all.  However, if your debit card is stolen, a thief can use it at many locations without being required to have access to a PIN number.  Money lost from your bank account in this manner is not refundable.  And thieves don't have to have your actual card.  If they acquire your number, they can drain your checking account entirely.  However, both Visa and Mastercard offer a $50 limit on liability on fraudulent charges made with the debit cards they issue.  But does your local bank?

Other disadvantages include not having the ability to earn interest on your interest-bearing checking account since, every time you use your debit card, the purchase is instantly subtracted from your bank account.  When you write a check, there is that period of time called "float" when you have the opportunity to earn additional interest before the check clears.  There are also fees associated with using debit cards.  Be sure to check with your issuer and shop around for the best deal.   The fees could add up to a hefty amount every year if you aren't careful.

Another disadvantage of using debit cards to make purchases comes into play when you have a dispute with a merchant over defective goods or services.  With a credit card, you can have the charges removed from your account when you don't receive merchandise or promised services, whereas, with a debit card, you're stuck unless you file suit against the merchant to recover your money.

Is Your ATM Card Really a Debit Card in Disguise?  Since the American public has largely rejected debit cards, banks renamed them "check cards", and began aggressively marketing them to consumers.  Why?  Debit cards are preferred by banks because they save money (less paper to process), bring in added revenue through debit card fees; and limit their own liability regarding fraud.  Some banks even mail unsolicited debit cards to customers, who in turn, think they are using ATM cards and remain unaware of the tremendous risk of theft until it is too late.

For this reason, if your bank markets a product called "check card", you might want to make sure that your ATM card is just that, an ATM card, and not an unsecured debit card that a thief can use to quickly drain your bank account of funds.
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