Debit Cards Frequently Asked Questions (FAQ)

Debit cards and Check Cards are also ATM Cards!

1. Are debit cards and ATM cards the same thing?
2. What’s the difference between on-line and off-line debit cards?
3. Can my debit card be used as a credit card?
4. Why do banks push debit cards so much?
5. What if my debit card is lost or stolen?
6. A thief drained my checking account; can I get my money back?
7. Do debit cards offer the same protection as credit cards on purchases?
8. How can I protect myself against fraud?
9. General Debit Card Facts

Up 1. Are debit cards and ATM cards the same thing?

Not quite! Simple automatic teller machine (ATM) cards can only be used at an ATM terminal with a personal identification number (PIN) to withdraw cash or to check the balance of your checking or savings account.

Debit cards are enhanced ATM cards with a debit feature that can be used to purchase goods and services wherever merchants display the card's brand name or logo. They look just like a credit card but unlike credit cards, where you “buy now and pay later”; debit cards are a “buy now – pay now” card that instantly deducts money from your checking or savings account!

They are accepted at grocery stores, retail stores, gasoline stations, restaurants and so forth, and rival cash and personal checks as a form of payment. They can still be used for ATM cash withdrawals and offer a good alternative to carrying a checkbook or cash.

Up 2. What’s the difference between on-line and off-line debit cards?

On-line Cards

When you use an “on-line” card the transaction is instantaneous! You make a purchase by swiping your card through the merchant’s terminal and punch in your personal identification number (PIN). The system identifies your card as a on-line debit card then, quickly checks to see if your account has enough money to cover the transaction and, if you do, it instantly transfers money electronically from your bank account to the merchant's bank account.

Off-line Cards

When you use an “off-line" card the transaction is processed much like a credit card. You make a purchase by swiping your card through the merchant’s terminal but instead of punching in your PIN, the terminal identifies your card as an off-line debit card, creates a debit against your bank account and stores the debit for processing later. You sign a receipt and then 2-3 days later the money is transferred electronically from your account to the merchant’s account.

Warning! Most, but not all, off-line transactions are verified to see if there are adequate funds. To prevent returned check fees and overdraft fees keep all receipts and be sure to deduct funds from checking or savings accounts after each sale.

Some things to consider about "on-line" and "off-line" cards:

• Banks charge different fees depending on the type of card;
• You can get both options on one card;
• On-line cards offer the security of a PIN while off-line cards do not.

Debit cards have many advantages but one major disadvantage is always remembering to deduct debit card transactions from your checking or savings account books. Failure to do this results in expensive returned check fees from both the merchant and your bank!

Up 3. Can my debit card be used as a credit card?

No! Debit cards use the money in your checking or savings account. Credit cards are like a loan. A bank or other financial institution makes money available to you and the amount (credit limit) is based on the issuer’s evaluation of your credit history, income, debts, and ability to pay. You may use the available credit with the understanding that you will pay, at least the minimum amount due each month including interest.

Up 4. Why do banks push debit cards so much?

• They make money, especially from off-line cards where they receive a fee of up to 2% of every off-line transaction instead of the smaller 7-10 cents for each on-line (PIN) transaction.
• Debit cards are a lot less risk than credit cards or personal checks!
• More merchants have credit card terminals than PIN-based terminals
• They save money on check clearing costs;
• There is less float time (the time it takes a check to clear)
• Merchants don't need to worry about bounced check risks or bounced check fees.

Up 5. What happens if my debit card is lost or stolen?

The Electronic Funds Transfer Act regulates debit cards. If your card is lost or stolen, report the loss immediately to your financial institution. Electronic Fund Transfer Act

If you lose your debit card, a thief can drain your entire bank account (and even your line of credit) -- without knowing your PIN. Furthermore, unlike a check, a photo ID is generally not required by the merchant to use a debit card.

Although many banks say your liability is limited to $50 with debit cards, ask to see their written policy. Some states limit your liability to less than the Regulation E maximums while other states do not regulate debit cards at all - ask your attorney general or state banking commissioner to be sure.

Unlike lost or stolen credit cards where your loss is limited to $50 per card more info. On an Electronic Funds Transfer (EFT) card, your liability for an unauthorized withdrawal can vary! Under federal ATM debit card law, you may be held liable for unauthorized transactions as follows:

1. Your loss is limited to $50 if you notify the financial institution within two business days after learning of loss or theft of your card or code (PIN).
2. You could lose as much as $500 if you do not tell the card issuer within two business days after learning of the loss or theft.
3. If you do not report an unauthorized transfer that appears on your statement within 60 days after the statement is mailed to you, you risk unlimited loss on transfers made after the 60-day period. That means you could lose all the money in your account plus your maximum overdraft line of credit. More On EFT

Some debit cards (check cards) offer consumers "zero liability" in cases of fraud, theft, or other unauthorized card usage if reported by the card-holder within two business days after discovery. After the two-day period, the cardholder could be liable for a maximum of $50. Other cards limit consumers' liability for fraudulent use of stolen debit cards to $50 regardless of the time period. Always ask for the issuers policy in writing! More Info

WARNING! Receipts for off-line (no PIN required) transactions include your full account number so save or completely destroy all receipts . . . because even if you do not lose your card, a thief who has your card number, can drain your bank account.

Up 6. A thief drained my checking account; can I get my money back?

If the thief drains your checking or savings account, unlike credit card fraud where you simply fight with the bank about getting disputed charges off your account, with a debit card you must fight to get your own money back!

You can be without the use of your money for up to 10 days, and in some cases, up to 45 days while the bank investigates the reported unauthorized transaction. If the transaction resulted from a point-of-sale debit card transaction (at a merchant location), the time periods allowed for the bank to complete its investigation are doubled -- to 20 days, which may even be extended to 90 days!

Meanwhile, because your account was ripped-off, other checks bounce causing returned check fees, bad credit reports, cash flow problems, late fees, overdraft fees and a host of other problems.

If any of your checks bounce due to unauthorized transactions, demand that the bank pay all bounced check fees and accrued interest on credit lines, if any, and send letters to any creditors affected and to the credit bureaus.

Up 7. Do debit cards offer the same protection as credit cards on purchases?

No! Debit cards offer less protection than credit cards on purchases that are never delivered, are defective, or were misrepresented. However, as with credit cards, you may dispute unauthorized charges or other mistakes within 60 days. See Electronic Fund Transfer Act

Up 8. How can I protect myself against fraud?

• If you suspect your card, account number or PIN has been compromised or is being fraudulently used, report it immediately to your financial institution.
  
  
• Hold on to and guard closely all receipts from debit card transactions. Thieves can get your name and debit card number from a receipt and order goods by mail or over the telephone.
  
  
• Debit cards do not have to be missing or even stolen in order to be misused so memorize your PIN – do not write it down or keep it with your card
  
  
• Also, do not choose a PIN that is easily figured out such as your phone number or birthday.
  
  
• Never give your PIN to anyone – ever!
  
  
• Always know how much money you have available in your account.

Up 9. General Debit Card Facts

• They free you from carrying cash or checkbooks;
  
  
• They are easier to obtain than credit cards;
  
  
• You are not usually required to show identification or give out personal information at the time of the transaction.
  
  
• You do not have carry traveler's checks or cash when traveling.
  
  
• They're more readily accepted than checks, especially in other states or countries where your card brand is accepted.
  
  
• There is no “grace period” or “pay later” option!
  
  
• Returning goods or canceling services purchased with a debit card is treated as if the purchase were made with cash or check.
  
  
• Debit cards allow access to money that you have set aside to cover other checks which have not yet cleared – keep accurate records
  
  
• Debit cards, like personal checks can result in returned check fees!

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