Apr 10 2019

How to Use a Debit Card: 8 Steps (with Pictures)

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How to Use a Debit Card

Debit cards look the same as credit cards and share many of the same convenient elements, as opposed to carrying around lots of cash or (if you really like going “old school”) writing paper checks. However, there are important differences between credit and debit cards, which impact how and where you should use them. Before deciding if you want a debit card from your bank, of if you should use it if you already have one, think about how debit card transactions work and what is best not only for your bottom line but also your personal financial security.

Steps Edit

Part One of Two:
Choosing and Using a Card Edit

Know the basics. Debit cards look just like credit cards and can usually conduct transactions in exactly the same manner, but they provide funds in very different ways. You should not think of them as interchangeable options when reaching into your wallet. [1]

  • Basically, every time you use a credit card, you are borrowing money that you need to pay back in full when your statement period ends, if you want to avoid paying interest on outstanding balances.
  • Debit cards are linked to your bank account, on the other hand, so you are drawing money directly from that account when you use one. Unlike credit cards, you can’t spend money you don’t have in your account (barring overdraft protection features, which will be discussed later).
  • You can use a debit card anywhere that you can use a credit card. It is up to you to decide whether you should, though.

Look for the card that suits you best. Banks and credit unions want every customer/member to have a debit card, because it is more convenient and lucrative (through fees) for them. The perks, protections, and costs associated with debit cards can vary based on the issuing bank, so it is always best to shop around and read the fine print. [2]

  • Look carefully at any fees associated with your card, which could include annual fees and transaction fees, among others. Some comparison shopping can lead you to a card with substantially lower fees, so it pays to look around.
  • Some banks also offer rewards for debit purchases — though usually only on “swipe-and-signature” purchases, for reasons discussed later in this article — that can include things like airline miles and cash-back bonuses. Shop around for the rewards program that suits you best.

Keep tabs on your available funds. With a credit card, you can spend up to your credit limit and worry about how to pay for it all when your statement comes due. With a debit card, you need to know how much money you have available in your linked account at all times, unless you want to risk having your transaction declined or incurring hefty overdraft charges. [3]

  • Debit transactions, especially those using a PIN number, are settled quickly, so you will have little time after the fact to determine if you need to add funds to your account to cover pending charges. Normally, your card will be declined if you have insufficient funds available.
  • Many banks tout the convenience of overdraft protection coverage with your card, which you may have to sign up for (or even opt-out of if you don’t want it). Overdraft protection can save you the trouble and possible embarrassment of a declined card, by allowing you to make purchases with insufficient funds available to cover them.
  • However, this comes at the cost of substantial fees per overdraft transaction. For instance, your morning routine of buying a coffee, a newspaper, and some chewing gum at different stops could cost you an extra $75, if you have insufficient funds and your bank charges a $25 overdraft charge per transaction.
  • Look carefully into the fine print of any overdraft protection program before agreeing to it. Your best option is to always keep a close eye on your balance and not try to spend what you don’t have.

Consider when not to use your debit card. As mentioned earlier, you can use a debit card anywhere you can use a credit card. That does not mean you should use them interchangeably, however. The main concern is fraud and your potential liability. [4]

  • In the U.S. federal code dictates that your maximum liability for fraudulent credit card transactions (such as if your card or number is stolen) is $50, with no time limit for initiating a claim. However, with debit cards you must claim fraudulent transactions within 48 hours to have the $50 limit. Between two and sixty days, your liability limit goes to $500, and after that time you are on the hook for all fraudulent transactions.
  • Banks can offer better than minimum fraud protection on debit cards, so shop around and ask questions when choosing a card.
  • Even with protection, dealing with debit card fraud is more of a hassle and potentially damaging to your finances. Someone who steals your card or information can drain your entire account balance, and then you have to work to get it all back in a time-consuming process. Thus, you may want to use a credit card instead of a debit card in the following situations: [5]
    • Shopping online, unless you are absolutely confident in the site’s security level.
    • Outdoor publicly-accessible kiosks such as gas station terminals and even ATMs, where criminals can install “skimmers” that steal your card information when you swipe. Particularly avoid card reading equipment that looks damaged, mismatched, or ill-fitting.
    • Payments where your card leaves your sight, such as handing a waitress your card at a restaurant.
    • Situations where a pre-payment deposit is required, such as at a hotel. A “hold” charge may be placed on your account to cover any potential overages — such as pay-per-view movies, room service, damages, etc. — and may not be removed for several days. This leaves your own money inaccessible to you and may throw off your available funds awareness.

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