Check, Credit, Or Debit Card?

Check, Credit, Or Debit Card?

Choosing a Payment Method for Security and Convenience.

How do you pay for everyday purchases or bills? Cash? Check? Credit Card? Debit Card? If you are like most people, you use a combination of these methods—and more. The advent and growth of electronic banking has encouraged many people to move more and more from paper (cash, checks) to plastic (credit cards, debit cards). All these payment methods have roles to play in personal financial management today.

All have their advantages and drawbacks. All can be used securely with proper precautions. All have consumer protections should fraud or theft occur, but those protections may vary depending on what the issuing institution offers you. This report offers a brief overview of the facts you need to make wise choices for your circumstances.

Debit Cards

Recently, debit cards became the most popular payment method in the U.S. for purchases made in person at the point of sale or service. Our use of personal checks, however, has continued to decline. A debit card, also called a check card, links directly to a checking account and typically has a Visa® or MasterCard® logo on it. It usually serves as your ATM card for all your accounts at the issuing institution. When you use a debit card to make a purchase the money is electronically deducted directly from your checking account.

There are two ways to make purchases with most debit cards. The first way, often called "signature debit" clears through the Visa or MasterCard system. This typically, but not always, requires your signature. You usually need to indicate the transaction is a "credit" transaction at many retailers, terminals, and gas pumps. Signature debit gives you many of the same rights in a merchant dispute that you have with a credit card. Transactions clear your checking account in one or two days typically.

The second way, often called "PIN debit" or "Point-of-Sale (POS)," clears through ATM networks. You'll need to input the ATM PIN (Personal Identification Number) after swiping your card. As a result, transactions clear your account immediately.

Benefits

• Convenience. Debit cards easily replace the need for cash for daily purchases, ranging from morning coffee stops to evening supermarket runs. They also save time over personal checks at the cash register and for many online or mail purchases.
• Debt management. Because debit transactions withdraw money directly from a checking account, users aren’t adding to a credit card balance.
• Record keeping. Monthly statements provide a record of all expenditures made with a debit card.

Cautions

• Risk of card theft or compromise of account information. If your debit card or account number and expiration date is stolen, the thieves will be taking money directly from your checking account. Theft of both debit and credit card account information is a continuing problem. For example, thieves have hacked the databases of major retailers obtaining account numbers. Also, theft by “skimming” has increased where numbers are stolen off card swipe machines using various methods. In very rare cases, thieves in retail outlets have stolen the information off the magnetic stripe while observing the PIN key strokes of the consumer.
• Lack of access to your funds during investigation. If you have reported an erroneous or fraudulent debit card withdrawal, the financial institution does not have to credit the disputed funds to your account for at least 10 business days while it investigates. During that time, you may not have the money you need to pay other bills or outstanding checks or debits could bounce.
• Less consumer

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