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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 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.

Understanding the Difference between a Credit Card and a Charge Card

Introduction

The terms “credit card” and “charge card” have often been used to describe the same thing but, in reality, they are two very different things.

A credit card is a standard card in which you can charge purchases and then pay them back over a period of time. A charge card, however, is card on which you can make purchases, but they must be paid off when your bill arrives.

Charge cards have been primarily issued by American Express, while other companies, such as MasterCard, Discover and Visa, have offered their customers credit cards.

The Benefits of a Charge Card

The premise behind an American Express card has always been liberal spending limits and no accrued interest rates, mainly because the card balance is paid in full each month. Most American Express credit cards have no set credit limit, but in order to qualify for an American Express credit card your credit history must be near flawless.

Annual Fee Amounts

There are also annual fees charged by American Express for its charge cards; they typically range between $25 to $500 a year, depending on the spending limit and benefits the card provides. The annual membership fee for owning an American Express charge card also comes with its share of perks, including a rewards program.

Should you fail to pay your balance on time, American Express charges either a flat fee or a percentage of the balance, depending on the card you are carrying. Most of the time, however, American Express affords its customers a liberal window in which to pay their balance; typically 40 to 50 days (compare that to 25 to 30 days for a standard credit card).

Flexible Payment Options

American Express also offers flexible payment options for its customers who use their cards to travel. American Express typically allows customers to carry a revolving balance of travel purchases, provided they exceed $200.

Credit Limits

American Express commonly keeps track of its customers buying habits and credit reports, and adjusts their credit limits to reflect this. Although American Express will not put a cap on your credit limit, they can refuse purchases if your balance becomes excessive. American Express, however, does not charge over-the-limit fees to its customers.