A card that offers speed and convenience also has many consumers unsure about costs and safety. Even though debit cards are becoming more common and popular, many consumers are still hesitant about how debit cards work, their pros and cons and how to use them safely.
Here are some answers to common questions.
What is a debit card? A debit card looks like a credit card, but it works like an electronic check. The payment is deducted directly from a checking account. Because the funds are deducted from your account very quickly, do not expect to have the option to stop payment on it. However, you retain full rights to dispute the transaction through your bank.
Why do people use debit cards? For many people, it is more convenient to carry a small, plastic card instead of a bulky check book or a large amount of cash. Using a debit card is also easier and faster than writing a check. It is a good way to pay for purchases without having to pay interest, as you would if using a credit card with an outstanding balance.
If I use my debit card to make purchases, can the merchant put a temporary “block” or “hold” on other funds in my account? Yes. In special circumstances, merchants can hold funds to allow for unknown expenses. An example is when using your debit card at the gas pump. Typically, the gas station will create two transactions. The first is to get approval from your bank for an estimated purchase amount (usually $75 or $100) when you swipe your card before pumping gas; the second is for the actual charges when you are done. Another may be for hotels or car rentals. Each of these may hold funds for incidentals for many days until your business is complete with them.
How can I overdraw my account if my bank network must approve a debit card transaction? Because the payments are electronic, they are deducted from your account more quickly than using a paper check. Even though a transaction was approved, you may overdraw your account because the bank won't know what other withdrawals or checks you have written have settled against your account that day.
What more do I need to know to prevent debit card fraud?
- Protect your debit card, as well as the card number, expiration date, PIN and the security code on the back of the card. “Even if you never lose possession of your card, someone who learns your card number, security code and PIN may be able to use that information to use the card online or even create a counterfeit card.”
- Never write your PIN number on or near your card – memorize it. Don't give out debit card information over the phone or the Internet unless you have initiated the contact and you know the person asking for the information. When in doubt, call the bank back.
- Take precautions at the checkout counter, ATM and the gas pump. Criminals are getting better with skimmers and planting them in places you'd never suspect like ATMs and gas pumps. Make sure it does not look like it has been tampered with.
In summary, you need to be aware and alert. Ask your bank for “text alerts” that can send you a text message when a transaction is processed using your debit card to your cell phone. This service keeps you one step ahead when there is a fraudulent transaction; and, thereby minimizes the inconvenience to you and allows the bank to return the funds back to your account faster.