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Little Known Facts about Debit Cards

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Your debit card may be your favorite piece of plastic in your wallet, and for good reason. Debit cards have a number of benefits and conveniences, and many people use them to keep them on track when it comes to managing their spending.

But do you know everything about your debit card? Chances are you don’t. It is important to understand that, although many people use it like they would a credit card, they have very different features and protections than credit cards.

The following is a list of little-known facts about debit cards that you need to know before you pull it out of your wallet for your next purchase:

• Your debit card may have theft and fraud protection, but you have to know how to use it – Your debit card issuer may offer you protection against theft and fraud-related happenings, but don’t expect to be covered unless you sign your name. In other words, pin purchases are likely not covered when it comes to fraud and theft protection. In addition, although federal law provides a personal liability limit of $50 for credit card customers, the protection offered for debit cards is much more limited and unclear. Before using your debit card, make sure you understand the personal liability limits set forth by your debit card issuer regarding theft and fraud.
• Your debit card may prohibit you from spending too much -Although most people understand that they have a daily limit on the amount of money they can withdraw from the ATM with their debit card, not many people are aware that they may also have a daily spending limit on their debit card. In fact, it is quite common for daily spending limits to exist on debit cards, so it pays to ask your debit card issuer about your daily spending limit so you won’t find yourself in a situation where your debit card is declined. It is also important to understand that daily spending limits often vary between customers based on their activity, balance and spending.
• Your debit card may be rejected if you spend unexpectedly – If your bank detects abnormal spending patterns, your card may be rejected. In other words, if you frequently spend locally and then decide to take a weekend trip across the state, this could raise a red flag with your debit card issuer, thereby resulting in a decline of the sale.
• Your debit card’s balance may not be accurate – Some transactions simply don’t appear right away on your debit card, making your balance seem larger than it really is. This could spell trouble as it may give you a false sense of security and cause you to spend more money than you really have in your account.

The Downside to Debit Cards

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There is a large group of Americans who have taken to using their debit cards on a daily basis. In fact, many consumers have begun using debit cards over credit cards because they feel they can better control their spending using this method. If you are using a debit card, it pays to understand that, although they can help keep us on budget, they can also cause financial trouble. And here’s why:

• You could be more vulnerable to identity theft – Although your debit card may come with its own protection against unauthorized charges, the hassles that would result from your card being stolen are many. In short, consider if someone accesses your account and drains it of your money, you will likely be facing innumerable charges, including bounced check fees and overdrawn fees. Again, your bank will likely help resolve these issues, but having a drained bank account – even for a day or two – could cause serious hassles.
• You could get burned with overdraft fees – Although the Federal Reserve prohibited banks from charging overdraft fees on debit cards purchases as of August 2010, you may have opted for your bank’s overdraft protection feature, which means your bank will extend you a line of credit if you overdraw your account. However, this doesn’t come free, and you could end up paying big in overdraft fees as a result.
• Your recurring payments could become a problem – Many people use their debit cards to sign up for recurring payments, such as for their gym membership or shopping club. However, many people have found that, even after they cancelled their membership, they continued to be hit with recurring payments. It is therefore extremely important to keep an eye on your monthly bank statement when you have recurring payments; or, better yet, opt to pay with a credit card, instead, as you won’t need to worry about overdrawing your account due to unexpected expenses. Keep in mind that using auto bill payments for utility payments could create these same types of problems, as well, so it pays to keep a close eye on your monthly payments, even if they are being automatically debited from your account.

The Top Four Reasons why Debit Cards may not be so Convenient After All

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It may seem like the best thing to do in this economy is use your debit card instead of your credit card. Although debit cards serve a useful purpose, it is important to understand that they may not be the best choice in every situation. And here’s why:

• Debit cards, although they provide protection from fraudulent purchases, may end up giving you a large headache because your checking account can be drained in the process.  Waiting for your bank to investigate a case of fraud and replace your checking account balance can be difficult because you may not have access to cash during this time, which means you could have bounced checks and the like.
• Often times, if you use a debit card at hotel and gas stations, they impose debit card blocks, which means they charge anywhere from $1 to $100 for up to a few days, which means your access to cash in your checking count could be compromised during this time.
• The use of skimmers by credit card thieves has put many debit card users at risk for fraud. Skimmers, small devices placed over standard card readers, allow thieves to steal debit card numbers and pin numbers and quickly drain individuals’ accounts.
• Debit cards don’t help build your credit score. You may think you’re doing yourself a favor by using debit cards over credit cards, but in the end you haven’t done your credit score any favors.

Credit cards, instead of debit cards, provide individuals with a number of financial protections, and are a great way to begin building a strong credit score. Provided you use common sense and practice responsibility when it comes to using a credit card, it can be quite advantageous to use one. In addition, credit cards can provide consumers with a number of perks, including rewards, travel protection, rental car insurance and discounts, just to name a few.

If you want to begin building your credit, then it pays to start exploring the many benefits of credit cards over debit cards. IYoYouYou

The Facts about Prepaid Debit Cards and how to Protect yourself

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You may be tempted to purchase a prepaid debt card as a credit card replacement, as a gift, or as a spending tool for your teenager. It may seem quite advantageous to use a prepaid debit card and, in some cases, it is; however, in order to make the best decision whether to use a prepaid debit card, you must know all the facts:

• Prepaid debit cards are not free to use. In particular, pay close attention to the small fees charged by the prepaid debit card company, as they can quickly eat away at your balance. Some of the fees charged by prepaid debt card issuers include: ATM cash withdrawal charges, PIN purchase charges, balance inquiry charges, and activation fees.
• Chargebacks are possible with prepaid debit cards. Some retailers do not accept prepaid debit cards for purchases (iTunes is one of them); although most retailers will simply decline the purchase, there have been cases where the purchase went through, but the customer found a chargeback that they were responsible for covering.
• If you lose your prepaid debit card, there are very little protections in place for you. In other words, prepaid debit cards are essentially viewed as cash by prepaid debit card issuers, so you have no protection if your prepaid debit card is lost or stolen.
• Because you won’t receive a monthly statement from the prepaid debit card issuer, it is very hard to track your spending. This makes it particularly hard for individuals who need to keep their spending to a minimum. Some prepaid debit cards provide features that allow individuals to view their activity online, but the prepaid debit card issuers usually always charge a fee to do this.
• You must keep track of your spending using a prepaid debit card; otherwise you may be quite embarrassed when a purchase is declined. Because retailers are not able to determine the balance on the card, you must be aware of what you have on the card so you can alert the retailer to only charge a certain amount to the card if your purchase exceeds the card’s balance. Then, you will need to cover the remaining retail purchase balance using another form of payment.

The Good and Bad Aspects of Prepaid Debt Cards

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There are many reasons to like prepaid debit cards, and it is evident that many Americans feel the same way. Prepaid debit cards do have many perks, but there may also be several disadvantages of using a prepaid debit card over a credit card. In other words, prepaid debit cards may be great in certain instances, and not so great in other instances.

Here’s the skinny on prepaid debit cards:

Advantages

• You can’t spend over the card’s value. Unlike credit cards, you are forced to spend within your means, thereby eliminating the possibility of overspending yourself into credit card debt. Many parents of teenagers give their children prepaid debit cards for this reason. If you have issues with spending, prepaid debit cards may be your answer when you hit the mall this holiday season.
• Your college aged child will appreciate its convenience, and so will you. If you have a child off at college, you can supply him or her with a prepaid debit card and add funds to the card whenever necessary. This will provide your child with the money necessary for college expenses, but will allow you to keep a tighter rein on his or her spending habits.
• No credit checks mean even individuals with the poorest credit can get a prepaid debit card. Because you are loading your own money onto the card, prepaid debit cards do not require credit checks.

Disadvantages

• The use of prepaid debit card will not have a positive effect on your credit score. If you want to build up your credit score, you will need to use a credit card, not a prepaid debit card, as these types of cards have no effect on your credit score.
• Prepaid debit cards come with fees, some of which can be quite steep. Although many individuals avoid paying with credit cards because they don’t want to deal with interest rates, they must also be aware of the fees that accompany many prepaid debit cards. Some of the fees you may find on prepaid debit cards include: activation fees, ATM withdrawal fees and balance inquiry fees, just to name a few.
• Prepaid debit cards usually have weaker protection against fraud. Unlike credit cards, prepaid debit cards don’t have the same automatic federal statutes that you would enjoy with the use of a credit card.

Credit Card Cash Advances: Resist the Temptation

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Cash advances may seem like a great idea at the time, but they may end up being your worst enemy when it comes to your credit card balance.

Cash advances on credit cards typically work like this: you need cash so you use your credit like you would an ATM card and withdraw money at any ATM machine. Sounds pretty simple, right?

Well, the process of obtaining a cash advance is the easy part. It’s the fees and interest rate that comes along with it that may end up causing you problems.

Let’s talk about why it may in your best interest to avoid cash advances:

• If you use the cash advance feature on your credit card, expect to pay a fee. In fact, every major credit card charges a fee for cash advances. You can expect the fee to range from $10 and up. Some credit cards charge a percentage of the cash advance amount, which can also be significant.
• If you have a great rate on your credit card, don’t expect the cash advance option to carry the same, competitive interest rate. In fact, you can expect to pay double – even triple – the amount in interest than you would on purchases and balance transfers. Some credit cards charge as much as 24 percent for a cash advance!
• Unlike purchases, where you can avoid interest charges by paying your balance off in full when your statement arrives, the interest on a cash advance begins to accumulate the day you take the cash advance. To put it into perspective, if you took a cash advance for $1000 at the beginning of your billing cycle, you could end up with more than $70 in interest charges by the time your bill arrives.
• Consider that if you pay just the minimum payment on your credit card with an interest rate of 24 percent for a cash advance, you could, in theory, only pay the cost of the interest each month, thereby leaving you with an untouched balance.  Sounds scary, right? This fact alone may be enough to make you run for the hills before you take out a cash advance!

Is Using your Debit Card in Place of your Credit Card always a Good Idea?

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The recession and national housing market crisis has begun shifting many consumers’ beliefs regarding credit cards and debt in general. As a result, many consumers have begun putting away their credit cards in favor of debit cards. But is this always the right choice?

More and more consumers are using debit cards over credit cards, and the data supports it: nearly 56 percent of consumers reported using a credit card in the past month, compared to 87 percent in 2007, according to Javelin Strategy & Research. In addition, total payment volume for debit cards surpassed total payment volume for credit cards for the first time since 2009. The study went onto report that it is estimated the number of people using a credit card during any given month will further drop to just 45 percent.

Although credit cards have been demonized by the government, the truth of the matter is that credit cards offer many protections that debit cards simply can’t.

Credit cards, unlike debit cards, offer the following benefits:

• Car Rental Protection – Many credit card issuers offer protection from car rental loss or damage, so it often pays to use your credit card when renting a rental car. Check your credit card’s terms and conditions before heading to the rental counter to be sure you will be adequately covered.
• Price Protection – If you purchase an item, only to find that same item for a lower price within a certain time frame (usually 30 to 60 days), you may be able to get a refund for that price difference through your credit card company. Citi, for example, offers consumers a rebate of up to $250 per item through their price protection plan.
• Purchase Protection – If you purchase an item on your credit card, only to have that item stolen or damaged during a certain time frame (usually up to 90 days), you may be eligible for a reimbursement through your card issuer. American Express, for example, offers its customers up to $1,000 per incident and up to $50,000 per card member per year. Purchase protection may also be used when a retailer will not accept a refund on an item.

ATM Safety – What You Need to Know

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Using an  ATM card might cost you a few dollars per transaction, but it is certainly convenient. 24-hour access all year round without having to go into the bank itself. These days, most ATM cards are actually debit cards and can e used to make purchases as well, adding to the convenience and ease of use. Unfortunately, this convenience does come with some risks. ATM users need to pay attention and take precautions to protect themselves from robbery. You also need to take steps to protect yourself should your card be stolen.

ATM Machines

Never use ATMs in dark and secluded locations. Be sure the area is well-lit and try not to go alone. Most ATM machines have security cameras with audio recording, but these do not always deter criminals and often, they disguise themselves well enough to avoid capture. e aware of your surroundings and any lurkers near the machine. Remember, criminals often operate in pairs or teams. Go with your gut. If you don’t feel safe, find another ATM. Stand very close to the machine and shield it as you enter your PIN.

Never be afraid to boldly ask someone to step away if you feel they are too close to the ATM. If you’re having trouble with the ATM, head to the bank instead of accepting help from a stranger. Hey, they might be well-intentioned, but how are you supposed to know that?

Never insert your card into a machine with a blank screen. Want for the prompt to insert it and if the card is swallowed and not returned, contact your bank ASAP.

There is a new type of technology available, but it is not in general use yet. It sounds like a good idea, but also has its downfalls. This technology allows you to immediately alert police of an ATM robbery-in-progress by enter your PIN in reverse. Unfortunately, one has to question how quickly the police would get there or if you might be injured or shot while the police were on their way for not delivering the money as demanded. Time will tell if this technology ever really takes off and if it is effective or not.

Your ATM Card

While you certainly need to protect yourself while using the ATM, you also want to guard your card by following these steps:

• Don’t loan out your ATM.
• Don’t share the PIN or write it on your card or on anything kept with your card.
• Be certain that the card is back in your purse or wallet before leaving the ATM or store where you have used it.
• Always know where it is and keep your purse or wallet out of sight at home so that no one is tempted to borrow it against your will.
• Watch your bank statements and report all suspicious activity immediately.
• Sign up for test and e-mail alerts on account activity, and should you discover that your card has indeed flown the coop, don’t wait. Report it right then and there (or as soon as possible, given banking hours).

Following these tips can and will increase the safety and security of your owning and utilizing an ATM card.

Credit Card Cash Advances: What You Need to Know

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Credit card cash advances. A good idea or a transaction you should avoid altogether? Some say yes; others advise consumers to steer clear of cash advances. The truth of the matter is that a cash advance can sure be lifesaver when other funds are limited. While you probably should not abuse the privilege by running out and getting some cash on every little whim, it is nice to have the option if and when the situation calls for it.

Things to Consider

Cash advances really are not the solution for a general cash flow problem. If you do not have enough money to pay your bills and meet your needs, how can you expect to pay off your credit card? Cash advances need to be reserved for emergencies where even though you have enough income, you just can not access the cash right then and there from some other source, but you know you will have the cash soon enough to not only meet all of your living expenses but to pay off what you owe on your credit card balance as well.

That said, there are a few other things you need to know before you run to the ATM to withdraw that green.

Grace Period

For most purchases, credit cards offer a grace period for paying down the balance before finance charges set in. With a cash advance, the grace period typically is not an option, and those finance charges go into effect as soon as you make the withdrawal.

Cash Advance Fees

In addition to any other fees you will already be paying on your credit card and your cash advance, you will incur a fee for your cash advance. This is a percentage (usually 2%-4%) of the amount of the cash advance. If your cash advance is $500, you will be paying a minimum of $10 and a maximum of $20 for the cash advance fee. This can get expensive on top of your other credit card fees and purchases. While you definitely want to take out enough to make the fees worthwhile, you also do not want to take a credit card cash advance and its subsequent fees too lightly.

Interest Rates

Your interest rate, depending on the card you carry and your credit approval, most likely runs somewhere between 12% and 23%. Interest can really add up on purchases alone, so considering that a cash advance can carry an even higher interest rate, you will want to keep this in mind. Assuming you pay off your entire balance by the due date, the interest can still take up a good portion of your balance due. If you only pay the minimum balance each month, it can add up even more. It’s important to be confident that you can pay back the amount of the cash advance along with your additional credit card activity, including the interest. In the end, you could wind up paying a lot more in interest than the sum total of the rest of your balance.

ATM Fees

You also need to know that when you go to the ATM to withdraw that money, the bank who owns the ATM will also be making some money off of your transaction. ATM fees can run $2-$4 per transaction and there is the rare ATM that even charges $5. Still, you want to be aware of the additional fees that you will be incurring, as this will show on your credit card statement, adding to the balance you will be responsible for paying back.

In conclusion, no, credit card cash advances are not a bad idea. They are a great and convenient source of funding when most needed. However, one should approach them responsibly, knowing they can pay back the balance and not overusing the privilege.

Consumers Turn to Debit Cards this Holiday Season: but is this the Smart thing to do?

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You may be taking the responsible route this year and ditching the credit card for a debit card instead. But is this the smartest – or safest – decision to make?

For many individuals burned by the economy and the credit crisis, turning to debit cards to make purchases just makes more sense than credit cards. According to their rational, using a debit card will help them to better manage their budget and stay within their budget.

Still, others are simply turning to their debit cards out of anger with the credit card industry. Many credit card customers have ditched their credit cards after their creditor either lowered their credit limit or increased their interest rate.

With Benefits Come Risks

Although the thinking behind using a debit card makes sense, there are a number of risks that go along with carrying a debit card around this holiday season.

First, it is important to realize that carrying around a card that is linked to your bank account is generally risky. If the debit card is lost or stolen, your bank account and its contents may be at risk. After all, the last thing you need this holiday season is for a credit card thief to drain your checking account.

Better Safeguards for Credit Cards

Although bank and debit cards offer protection against unauthorized use, there are more safeguards in place for credit cardholders. In addition, it may take some time for the bank to reimburse you for stolen money, which may simply come too late when you have bills and other household expenses to take care of.

The Threat of Bank Overdraft Fees

Second, although a debit card is a great way to keep your spending in check, if you don’t pay close attention to your balance you could be faced with stiff overdraft fees. Many individuals simply assume that their card would be declined if there was not enough money in the account, but that is not always the case. In fact, consider that banks collected nearly $35 billion in overdraft fees last year alone.

Keep in mind that the median overdraft fee is $35 for each purchase, so imagine what a handful of overdrafts in one day could do to your coveted budget. Credit card interest rates aren’t sounding so bad anymore, are they?