Debit Cards

In recent years debit cards have risen in popularity, often replacing payment by cash and check. A debit card is unlike a credit card in that it is tied directly to a savings or current account. When you make a purchase with a credit card, you are taking out a loan of money from the card issuer, whereas a debit card purchase withdraws money from the account to which it is tied.

Because your debit card is tied to your bank account, there are specific considerations and precautions to keep in mind when you use them.

Stay in Check
Always know your present bank account balance and available funds. And do not forget about checks that have not cleared your account. Consider opening an online banking account that allows you to manage debit card purchases, checks and bill paying all at once. You will have a one-stop shop for managing all the transactions on your account.

Know Your Limits
Many debit cards have daily spending and cash withdrawal limits. These limits are meant to protect you in case your card is stolen. But remember, your card might be declined if you exceed your limits even if you have enough money in the bank. Know your limits and contact your bank if you need to raise or lower the amounts.

Also remember to track your spending. When you write checks or make automatic payments that exceed your account balance, you may be subject to overdraft fees. Balance your account regularly to avoid added fees.

Avoid Interbank Charges
Many banks may charge a fee if you use another institution's ATM with your debit card. Instead of paying extra, choose a bank with ATMs convenient to where you live and work.

Keep a Secret
Your debit card will require a Personal Identification Number (PIN) for security. Choose a unique number. Avoid obvious choices like your address, phone number or birth date.

Always keep your PIN private. Memorize it. Do not write it down anywhere. And never tell it to anyone. If you feel your PIN has been compromised or someone may have identified it, change your number immediately by contacting your financial institution.

Unbilled Card Transactions
In some cases, a transaction that is not yet complete will require that a certain amount of money in your account be held, or earmarked, for that transaction. When you check into a hotel, for instance, your card is authorized and funds covering the length of your stay are held. But the money is not deducted from your account until the final cost, which may include room service charges or phone calls, is known. This protects you and the hotel owner by ensuring that the correct amount of money is available when the transaction is completed.

Losing Your Debit Card
When you lose your debit card, it is important to report to your financial institution immediately. You are usually liable for all transactions, authorized or otherwise, made on the debit card until the bank is notified of the loss.