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Using a Debit Card Wisely

For the first time in history, debit card use surpassed credit card use in nearly all parts of the world. Debit cards are convenient and safer to use than cash. And, you can use them for any type of purchase where Visa or MasterCard is accepted – whether shopping at the grocery store or eating at a restaurant with your family.

How Does a Debit Card Work?

A debit card works like a check, without all the hassles. You present the card as though it was a credit card and the transaction is handled exactly the same way, except the money is deducted directly from your checking account. You can also use it as an ATM card; in fact, many financial institutions combine the debit and ATM card into one card for convenience. That way, you can access thousands of ATMs and point-of-sale machines each day.

Debit Card Usage Tips

As the use of debit cards increases, it is important for you to understand everything you can about debit cards, their fees and uses. Take a look at some important tips to consider when using a debit card:

  • Be sure to keep your debit card secure; try to avoid carrying it loosely in your pocket or jacket.
  • Keep your debit card in the same place in your wallet so you will know if it is missing immediately.
  • Make sure to record all of your debit card transactions (including ATM transactions) immediately in your check register.
  • Memorize your PIN for your debit card; never write it down.  Additionally, choose a PIN that is not traceable to you or is easy to decipher.
  • You should always be aware of how much is in your checking account so you do not spend more than you have available; this may result in an NSF charge to your account.
  • Be sure to have your identification ready when using your debit card.  In many instances, merchants will check your ID, as they would a credit card, to verify that you are indeed who the debit card says you are. You should also sign the back of your card as you would a credit card primarily for verification purposes.
  • Never give your debit card number over the phone unless you initiated the call and are sure the recipient of the information is legitimate.
  • Be sure to review your checking statement on a monthly basis and report any unauthorized transactions to your financial institution immediately.
  • Time is essential when it comes to reporting a lost or stolen debit card; be sure to call your financial institution immediately.  If you report a lost or stolen debit card within two days, you will literally save yourself a lot of money.

Debit vs. Credit

Many people ask the question:  “Is using a debit card for major purchases better than using a credit card?”  The answer is “yes” and “no.”  You can use the debit card the same way as you would use a credit card; however, the money comes directly from your checking account. Many people like using it because the amount immediately reflects directly in their checking account and they will not be tempted to roll over the balance as they would using a credit card (saving money in the long-run).

However, debit cards do not have the same type of consumer protection as credit cards. The Fair Credit Billing Act (FCBA) states that users of credit cards are protected against fraud and will only pay up to $50 for the amount in question; the FCBA does not apply to debit cards.

Furthermore, if you are dissatisfied with the purchase you make, and there is an amount in question, the FCBA states that you can withhold payment until further investigation by the creditor; this cannot be done with a debit card.

There is some protection for a debit card, though.  The Electronic Funds Transfer Act (or Regulation E) states that if a consumer notifies his/her financial institution within two days of a lost or stolen card, he/she will only be liable for up to $50.  However, if the notification is given after the two-day window, the consumer may be liable for up to $500.

If the card is used fraudulently at a point-of-sale location, the consumer is not liable for any of the funds.  It is important to note, however, that the amount is still immediately reflected in the checking balance because of the nature of the debit card, and a credit would have to be given to the consumer; payment cannot be withheld.

Alternative Ways to Use a Debit Card

Another question often asked by consumers is:  “Can a debit card be used without having a checking account?” The answer is:  “yes.” There are now several different options available for the use of debit cards without a checking account.

Some employers offer employees the option of having their paycheck placed into a debit card, providing the employee with immediate access to his/her money. The debit card can then be used as an ATM card or for any other purchase made with a typical debit card. These cards offer employers significant savings, as it is much less expensive to electronically pay employees than to pay them with checks; however, employees are subject to some fees with a payroll card. 

Some financial institutions charge a monthly maintenance and usage fee. In some instances, these fees may add up to as much as $30. In the instance where a person does not have a checking account, though, a $30 monthly fee is much less expensive than trying to get his/her check cashed at a check cashing establishment, where the fees are astronomical.

Other employers offer a medical benefit card to employees. Using this card, you can pay for medical expenses with money set aside in a flexible spending account, or FSA; these accounts permit employees to use pre-tax dollars for medical expenses. As you can imagine, having these funds separated will help you use them only for medical expenses and will provide you with appropriate itemization for tax purposes.


Whether using it for your groceries, or for specific medical purposes, a debit card is a great way to help you monitor your spending, keep you from spending money you do not have, and save you from the extra charges associated with credit cards.


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