Debit Cards

Debit Cards

Spending money has never been easier. With just a swipe of plastic a transaction is complete. In most instances, using a debit card doesn’t even require a signature, just a PIN (personal identification number).

How is a debit card different from a credit card? When you use a debit card it subtracts money from your checking account at the time of the transaction or soon afterwards. When you use a credit card you pay for all your purchases at the end of the billing cycle.

One advantage of using a debit card is that it is much quicker to swipe a card than write a check. You eliminate the need to carry around a checkbook or carry cash with you all the time. It is also convenient when you travel because merchants are more willing to accept a debit card than a check, especially if the check is written on a bank in another town or state. When you use a debit card you usually are not required to show identification or to give out any personal information.

Debit cards are easier to obtain than credit cards. Banks are more willing to issue debit cards than credit cards because the consumer is using money they already have on deposit.

A disadvantage of debit cards is the need to establish a system of record keeping, since you are not using a check register. You need to make sure you know how much money is in your account at all times and that you don’t forget to account for all debit card transactions. For those who don’t like to keep records it is easy to overdraw and have a purchase denied. Some people think that using a debit card doesn’t “feel” like spending money and it encourages them to overspend. Save all receipts and check each statement against the receipts carefully. Remember that it is possible to not have enough money in your account to cover a purchase and the debit card transaction will still be approved. It depends on the time period between the transaction and the actual movement of funds out of your account. Most banks will charge you a fee of $25 to $40 for making a purchase without having enough money in the account to cover it. So it is very important to know how much you have in your account--or you could end up owing even more than you spent!

If your debit card gets lost or stolen report the loss as soon as possible. If you report the stolen card within two days you may only be liable for fifty dollars if the card is used fraudulently. If you fail to report the missing card or are slow to report, you could have to pay a much larger amount.

Debit cards simplify some aspects of finances, but as with checks, the most important aspect is your ability to keep records. Just remember you are still spending your hard earned dollars and remember to protect your card and transactions from people who might steal your personal information.