Monday, September 8, 2008

Pay Now Or Later - Debit vs. Credit

Can't decide if you should shop with a debit card versus shopping with a credit card. Which is better, debit or credit?

Debit cards can have monthly or per transaction fees so review the cardholder agreement carefully. It is a rapid transaction between a merchant and your personal bank account. When you use a debit card, the bank subtracts money from your bank account.

One type of debit card is a check card that can be used as a credit card or as a debit card at grocery stores, gasoline stations, restaurants, or drug stores. When used as a credit card, you sign the receipt as you would a regular credit card. When used as a debit card, you enter your PIN. Some banks may charge a fee for using a check card as a debit card. A check card is identified by the word 'Check Card' across the top of the card. Visa has created a line of check cards with a Visa logo that can be used at all locations where Visa is accepted. Most, but not all, transactions are verified to see if there are adequate funds. Instead of using a PIN number, you must sign a receipt, as you would with a credit card.

Credit is money made available to you by a bank or other financial institution, like a loan. The amount the issuer allows you to use is determined by your credit history, income, debts, and ability to pay. You may use the credit with the understanding that you will repay the amount, plus interest, if you do not pay in full each month. You will receive a monthly statement detailing your charges and payments. Credit cards are protected under the Fair Credit Reporting Act, but debit cards are not. The Visa??? check card is linked to your checking account. Visa??? check cards have a zero liability policy that protects consumers, but not all banks have this protection.

If your debit or check card is lost or stolen, report it to your bank immediately. Government regulations require debit card issuers to set a maximum liability of $50 if the debit card is reported lost or stolen within two business days of discovery. Your liability increases to $500 if the lost or stolen debit card is reported within 60 days. If you don't notify the bank of the theft within 60 days after a bank statement is sent you could lose the money in your checking and overdraft accounts.

Here are six tips for protecting your debit card or credit card.

1. If your card is lost or stolen, immediately notify your bank.

2. If you suspect your card is being fraudulently used, immediately report it to your bank.

3. Always verify how much money you have available in your account. Be mindful that your debit card may allow you to access money that you have set aside to cover a check that has not cleared your bank yet.

4. Save your receipts from your debit or credit card transactions. A thief can use your receipt to get your name and debit card number to order products by mail or over the telephone. Your card doesn't have to be missing in order for it to be used.

5. If you have a PIN number, memorize it. Do not keep your PIN number with your card or in your purse or wallet. Also, don't choose a PIN number that a can be easily guessed such as your phone number or birthday.

Keep all of your receipts in one place so they can be easily retrieved later to verify against your monthly bank statement. 6.

Happy spending! I have used both debit and credit cards, but I am old-fashioned, and I pay for everything with cash. So think twice before using a debit card or credit card.

A consumer will be charged $30 for every transaction that occurs when the account is overdrawn. This is because there are no laws requiring prior approval to process the transaction. Be cautious when using a debit card, because some banks process debit charges although insufficient funds are in the account, which converts the debit transaction to a credit transaction.


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