Debit Cards
Most people have seen that commercial with a crowded store with people in a shopping frenzy and then the whole process comes to a screeching halt when someone pulls out some cash to pay at the register. Then you see a VISA logo pop on the screen advertising the VISA debit card.
In simple terms, a debit card is actually subtracting (debiting) money from your checking account each time you use it. Your available funds are reduced in your account just as if you had went to your bank and made a cash withdrawal, used an ATM, or wrote a check on your account.
Debit cards with a logo with VISA have emerged in popularity in the last 10 years replacing the concept of writing checks. Merchants, like your local dry cleaner, welcomed this with good and bad sentiment because of two reasons. The good side of debit cards is that it is quicker than writing a check (not paying by cash as the VISA commercial indicates) and once the transaction is complete, the merchant knows he will get paid (no hot check to worry about). The bad side was the merchant was charged a fee for that transaction - usually between 1% to 3%, something they did not have with a cash or check.
Consumers have flocked to debit cards in droves because of convenience. There are several reasons for this:
1.People do not have hassle of pulling out the checkbook and pen and writing a check. It is much easier to swipe a card and enter a PIN.
2.It is widely accepted. Many places will not accept checks and now you can use your debit card if they accept the brand of debit card you have, such as VISA or MasterCard.
3.Easier to carry, especially for men. It fits in your wallet much easier than your checkbook fits in your pocket.
However, do not think that your bank is issuing you that card as a favor. Debit cards are big business for your bank and credit unions because of fees that they can collect for your misuse of the card.
Many times when you open a checking account and request a debit card, you are also getting a line of credit with that account - it is called overdraft protection. The bank calls it a courtesy because they do not want you to be embarrassed when you make a purchase and cannot pay. It was the same concept as the bank covering a hot check. The bank gives you this protection at a price, usually $20 to $40 dollars each time you overdraw your account. Five years ago, you could usually go to your bank if this happened and if it was an isolated occurrence they would remove the fee (providing you now had money in your account to cover the original purchase). Today, you will probably not be so lucky. Unfortunately you could buy a sandwich and mistakenly overdraw your account by a few dollars and then be charged $25 for the overdraft fee!
In most cases the overdraft is caused by simple oversight. People may lose receipts or be negligent in recording the purchases they made, so they do not know exactly how much money they have in their account to spend.
The key to debit cards is remember to write down all purchases, and if you are getting low on money in your account, watch out. Also, be mindful of your banks deposit policies. If you deposit money today, you may not have access to those funds immediately. So do not go out and spend the money until you know it has really increased your available balance. Talk to your bank if you do not understand how they credit deposits to your account.
Most people have seen that commercial with a crowded store with people in a shopping frenzy and then the whole process comes to a screeching halt when someone pulls out some cash to pay at the register. Then you see a VISA logo pop on the screen advertising the VISA debit card.
In simple terms, a debit card is actually subtracting (debiting) money from your checking account each time you use it. Your available funds are reduced in your account just as if you had went to your bank and made a cash withdrawal, used an ATM, or wrote a check on your account.
Debit cards with a logo with VISA have emerged in popularity in the last 10 years replacing the concept of writing checks. Merchants, like your local dry cleaner, welcomed this with good and bad sentiment because of two reasons. The good side of debit cards is that it is quicker than writing a check (not paying by cash as the VISA commercial indicates) and once the transaction is complete, the merchant knows he will get paid (no hot check to worry about). The bad side was the merchant was charged a fee for that transaction - usually between 1% to 3%, something they did not have with a cash or check.
Consumers have flocked to debit cards in droves because of convenience. There are several reasons for this:
1.People do not have hassle of pulling out the checkbook and pen and writing a check. It is much easier to swipe a card and enter a PIN.
2.It is widely accepted. Many places will not accept checks and now you can use your debit card if they accept the brand of debit card you have, such as VISA or MasterCard.
3.Easier to carry, especially for men. It fits in your wallet much easier than your checkbook fits in your pocket.
However, do not think that your bank is issuing you that card as a favor. Debit cards are big business for your bank and credit unions because of fees that they can collect for your misuse of the card.
Many times when you open a checking account and request a debit card, you are also getting a line of credit with that account - it is called overdraft protection. The bank calls it a courtesy because they do not want you to be embarrassed when you make a purchase and cannot pay. It was the same concept as the bank covering a hot check. The bank gives you this protection at a price, usually $20 to $40 dollars each time you overdraw your account. Five years ago, you could usually go to your bank if this happened and if it was an isolated occurrence they would remove the fee (providing you now had money in your account to cover the original purchase). Today, you will probably not be so lucky. Unfortunately you could buy a sandwich and mistakenly overdraw your account by a few dollars and then be charged $25 for the overdraft fee!
In most cases the overdraft is caused by simple oversight. People may lose receipts or be negligent in recording the purchases they made, so they do not know exactly how much money they have in their account to spend.
The key to debit cards is remember to write down all purchases, and if you are getting low on money in your account, watch out. Also, be mindful of your banks deposit policies. If you deposit money today, you may not have access to those funds immediately. So do not go out and spend the money until you know it has really increased your available balance. Talk to your bank if you do not understand how they credit deposits to your account.