Debit card 101: what they are, how they work

It's hard to fathom how much the financial industry has changed in the past several decades. Before the first charge card was introduced in 1950, "cash and carry" was pretty much the rule for most purchases. Prior to widespread use of automated teller machines (ATMs) in the late 1970s, many people wasted their Friday lunch hour waiting in long bank lines to cash their paychecks.

Another banking innovation - the debit card - has had a major impact on how many of us now manage our finances and make purchases.

Debit cards are enhanced banking cards directly linked to your bank account. Along with making ATM withdrawals from your checking or savings account, you can also use debit cards to purchase goods at point-of-sale merchant locations without having to write a check. In either case, the amount is automatically deducted from your account, just as though you had written a check.

Key debit card benefits include:

• Can be used at ATMs, 24/7, to withdraw cash or make deposits instead of waiting for a teller during regular banking hours.
• Makes paying at a checkout counter quicker and more convenient-no need to fill out a check or present identification and wait while it's written down or verified.
• Many merchants allow you to withdraw additional cash with your purchase, saving a trip to the ATM.
• Use it out of town or at locations where personal checks are not accepted.
• Safer than carrying checks or cash.

Whenever it comes to your money, you always need to keep a close eye on your personal bottom line. With debit cards, keep these points in mind:

• You should be certain of your bank account balance so you don't spend more than your available funds.
• Some debit cards have monthly or per-transaction fees, so it pays to comparison shop when opening an account.
• Guard your card and personal identification number closely - never let anyone borrow it.

Debit cards also carry an added level of security not available with cash or checks. Most debit card transactions made with a national network like Visa receive `zero liability' fraud protection. This means that if your debit card is ever lost or stolen and you report it promptly, you won't be responsible for any fraudulent purchases or cash withdrawals. The Federal Trade Commission's web site (www.ftc.gov) and your bank have more details. The National Consumers League also has a helpful brochure on debit cards at www.practicalmoneyskills.com/resources.

You'll need to keep track of debit card transactions in your check register along with your written checks. If you're withdrawing money from an ATM outside your bank's network, there may be additional service charges, so be sure to enter them in your register as well, or your account won't balance.

One last point: Remember that debit card transactions, just like checks, are drawn against the money you already have in your checking account. It's not a temporary loan from the bank to be repaid later, so it's a good reminder to live within your means and spend responsibly.

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