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The Best Little Money Book

Tip of the Month

Debit Cards

A debit card (sometimes called a bank card) does not have many of the same protections that a credit card has. When you use a debit card you are allowing the transfer of the money from your bank account to be electronically moved to another bank account. Debit cards can be used when you are paying for a service or making a purchase and at an ATM.

Your debit card works like writing a check on your bank account. Your money is on deposit and you are spending your own money and actually paying with cash. Deductions come directly from your checking account -- or savings or money market accounts, if your card is linked to these accounts -- when you make a transaction.

There are different types of debit cards. Some need a PIN to complete the transaction and other debit cards require a signature. When a signature is needed, the money does not come out of your account immediately. Like a check, it can take two to three days for the transaction to be completed. If you plan to use your debit card at an ATM you will need a card that requires a PIN. Some debit cards let you use either a signature or a PIN and some require both a PIN and a signature. This last type may be the most secure but a debit card is not as secure as a credit card and does not have federal protections.

Transactions show up on your account statements. Keep a record of all your debit transactions so you do not overdraw your account and to be sure to review your statement. Check your available balance regularly. And be aware of potential fees for using a debit card:

  • There is usually a fee to use your debit card at an ATM that is not operated by your financial institution.
  • You can be charged an overdraft fee if there is not enough money to cover transactions.  This fee could be up to $35 and could be charged for every purchase until you add money to your account. Read the information your bank gives you with your debit card.

According to FICO Card Alert Services, there was a 70 percent increase in debit card fraud between 2015 and 2016. If you are a victim of debit card fraud, you need to report it immediately to your bank or you could be responsible for transactions that you did not make.

  • When reported within two business days you are only responsible for $50 of unauthorized transactions. You would not be responsible for any transaction if you report you card lost or stolen before any unauthorized transactions take place.
  • If you have unauthorized transactions on your account and you do not report them as stated above, you could be responsible for $500. If reported after 60 days, you could be responsible for unlimited transactions.

What to do:

  • Sign up for fraud alerts with your bank if it does not come automatically with your debit card.
  • Update your information with your bank when you change phone numbers or addresses so they can contact you when they suspect fraud.
  • Don’t use the ATM if you think it may have been altered.
  • Cover the key pad with your other hand when you put in your PIN.