It is often easier to get than a credit card.
You don't have to get your check approved or show identification at stores.
You don't have to carry cash, a checkbook or traveler's checks.
Debit cards are more readily accepted than checks, especially when you are traveling.
You don't pay interest charges.
Because checkout lines move faster, storeowners like debit cards. They don't worry about bounced checks or need to take checks or cash to the bank. Debit card processing fees for the merchant are generally lower than credit card fees.
Wednesday, September 2, 2009
Debit Card or Credit Card?
What's the difference between a debit card and a credit card?
While a debit card looks like a credit card, it works more like cash or a personal check. You "pay now." With a credit card, you "pay later."
Debit means "subtract." When you use a debit card, you subtract money from your own checking or savings account. As with credit cards, you use it in stores for purchases. At check-out, the card reader electronically contacts your bank and subtracts the amount from your account. The money you have in your bank account limits how much you can spend. However, if you are not careful in watching your daily account balance, you can over withdraw your account. Some systems will allow you to use your debit card when you don't have enough money in your account to cover the purchase. This can result in hefty overdraft fees.
Using a credit card is somewhat like taking out a loan from a bank or other financial institution. You have to pay back the credit you used each month. If you pay back less than the full amount you owe each month, you pay interest on the amount you don't pay back. The credit card company sets the total amount you can charge based on your credit history, income, debts and ability to pay.
Some cards are dual-purpose credit/debit cards. Before you swipe the card through the reader, you select a "credit" or "debit" button on the reader. If you select "debit," you then enter your Personal Identification Number (PIN).
If you select "credit," you are given a credit receipt to sign. "Credit" charges will appear on your next charge account bill.
While a debit card looks like a credit card, it works more like cash or a personal check. You "pay now." With a credit card, you "pay later."
Debit means "subtract." When you use a debit card, you subtract money from your own checking or savings account. As with credit cards, you use it in stores for purchases. At check-out, the card reader electronically contacts your bank and subtracts the amount from your account. The money you have in your bank account limits how much you can spend. However, if you are not careful in watching your daily account balance, you can over withdraw your account. Some systems will allow you to use your debit card when you don't have enough money in your account to cover the purchase. This can result in hefty overdraft fees.
Using a credit card is somewhat like taking out a loan from a bank or other financial institution. You have to pay back the credit you used each month. If you pay back less than the full amount you owe each month, you pay interest on the amount you don't pay back. The credit card company sets the total amount you can charge based on your credit history, income, debts and ability to pay.
Some cards are dual-purpose credit/debit cards. Before you swipe the card through the reader, you select a "credit" or "debit" button on the reader. If you select "debit," you then enter your Personal Identification Number (PIN).
If you select "credit," you are given a credit receipt to sign. "Credit" charges will appear on your next charge account bill.
Understanding Debit Cards
Janet uses her bank debit card for almost all her monthly purchases. Asked why she doesn't just pay with cash, she says that she prefers the convenience of a debit card. "It's safer than carrying cash. And you don't have a huge bill to pay at the end of the month."
"I like the pay-as-you-go concept where you only spend what you have rather than borrowing" as you would with a credit card, she adds. And of course, if you don't pay off your credit card completely each month, "there are the hefty credit charges." They can run 9 percent to 20 percent.
If you want the convenience of a credit card, but don't want interest payments or a large bill to pay off monthly, then a debit card may be the answer for you, too. Debit cards work like cash or a personal check. The money you "charge" is automatically deducted from your bank account.
Yet, debit cards don't have the same protections from unauthorized use as credit cards.
"I like the pay-as-you-go concept where you only spend what you have rather than borrowing" as you would with a credit card, she adds. And of course, if you don't pay off your credit card completely each month, "there are the hefty credit charges." They can run 9 percent to 20 percent.
If you want the convenience of a credit card, but don't want interest payments or a large bill to pay off monthly, then a debit card may be the answer for you, too. Debit cards work like cash or a personal check. The money you "charge" is automatically deducted from your bank account.
Yet, debit cards don't have the same protections from unauthorized use as credit cards.
Reloadable Debit Card
A reloadable debit card can be used like a credit card but the limit a user can spend is based upon his or her own deposits into the account. Lenders that offer prepaid accounts usually wave fees if the user's check is directly deposited into the account and the total amount per month that is deposited totals a minimum amount set by the terms of the agreement. Not having direct deposit will mean paying a monthly service fee. The monthly service fees are normally lower than fees imposed by banks for checking or savings accounts. A user never has to worry about NSF fees, late fees, annual fees, or overdraft fees with a reloadable debit card. Some of the features include easy bill pay, free account alerts by email or text message, and being able to access cash from any ATM machine. Banks normally guarantee approval if the applicant can provide sufficient identification information. This can usually be accomplished with a driver's license number, social security number, or a birth certificate. Most companies will want at least two forms of identification and may ask that the applicant fax documentation for proof. Users can load cash at a retail location onto a reloadable debit card or they can have their employer directly deposit their paycheck into the account. Sites online have a direct deposit form that can be given to the user's payroll department. The information needed is similar to a regular checking account that uses a routing number for direct deposit. Many retailers allow a person to cash his or her paycheck at the register and at that time can load part or all of the funds onto a prepaid card. In addition, there are some stores that offer a prepaid card to anyone who can supply the necessary identification. "So teach us to number our days, that we may apply our hearts unto wisdom" (Psalm 90:12).Many people today find using a card instead of carrying cash easier. Cash is a little harder to keep up. The change can be very bulky and can weigh down a pocket or a handbag. In addition, it makes it easier to shop online because most online retailers take credit cards. A reloadable debit card can be used as a credit card. Using the account as a debit is possible as well but the user will have to enter a pin number at the time of checkout. This type of account is very attractive to people who do not have a checking account. Those that have a checking account but do not have direct deposit may want to consider a prepaid account for times when they may be out of town and need to cash a payroll check. Prepaid accounts can usually be accessed by the issuer online so that the account holder can view an online statement showing all of the transactions made to the reloadable debit card. Some issuers allow online electronic bill pay. One monthly fee is usually due for a specific amount of payments made. Those who would prefer having a paper check mailed to creditors can opt for this service but will normally have to pay a fee that is charged per check issued. An online statement will show all types of transactions made on the account and the statement can be printed out. In addition, a user can find out the balance left on his or her card by accessing the account online.Using the account as a debit instead of a credit may cost a small fee for each time a pin number is needed. A debit transaction allows a user to get cash back when making a purchase. This fee is usually smaller than an ATM fee would be. Accessing cash on a reloadable debit card can only be done by either going to an ATM or using it as a debit at the grocery store. ATM withdrawals have a daily limit associated with them. Using the card as a credit at any retailer is free including online purchases. Some lenders offer money sharing between members who have accounts with the issuer. This can be done by following instructions that are located on the issuer's site online. When making gasoline purchases more than the amount purchased may be held by the gasoline merchant. This just means that there needs to be extra funds in the account in case the merchant automatically holds a higher amount until the transaction is completed. Once the transaction is completed the extra funds held will be available in the reloadable debit card account. The prepaid account can also be used to make reservations for hotels and rental cars but again the merchant may place more funds on hold than the actual charge will end up being so there should be extra funds available to cover this extra amount.After making a contribution to a reloadable debit card the funds are normally available within 30 minutes after the amount is loaded. Other features include no credit check needed for approval, guaranteed approval, and free unlimited purchase transactions. Thousands of retailers participate in the program making it easy for a user to find a place to reload funds. Issuers provide customer service via online or by containing a representative through a toll free number. Prepaid cards can be used at any place that takes debit and credit cards which includes millions of locations including catalog purchases.
Money Matters: Teens' First Debit Card
Today's teens are very savvy when it comes to money matters. They are some of the top consumers in our society. Many have jobs, allowances and various sources of income. Savings accounts for college expenses are important and easy access to that money while away from home is a necessity. A recent Junior Achievement poll found that more than 11% of teens carry a credit card. Three out of ten teens have checking accounts. Becoming increasingly popular is the prepaid debit card. A debit card allows easy access to accounts without the temptation of a credit card. Using a debit card will help students get ready for credit cards as they go off to college. A debit card can be the right tool for your teen. The charge is deducted directly from an account's balance. It's a prepaid credit card that parents control.Debit cards are useful to help your teen track and manage spending money as well as keep their money safe. Prepaid debit cards are a great way to offer some parental control on how your teenager learns to be responsible with money. You can set daily, weekly or even monthly spending limits. Help your teen learn the correct way to handle their finances and to respect their money.When its time to apply for a debit card, there are a few common sense safety guidelines you'll want to share with your teen.Using an ATM (Automated Teller Machine) has become a common part of everyday life. It's fast and convenient. Help your child remember that the card is valuable and some precautions are necessary when using it. Here are 10 tips to protect your card and your money:1. Never write your PIN (Personal Identification Number) on or near your card. Keep a copy of your card and PIN at home in a safe place.2. Never give your PIN to anyone or tell it over the phone.3. Never give your card to anyone else. It's like handing them a blank check.4. Keep your card away from anything magnetized. Also, don't get it dirty, scratched, or leave it near heat.5. Be aware of your surroundings. If you notice anyone suspicious, leave the area and find another ATM. Pay attention to people who may be standing too close to you as you use the ATM.6. Before you step up to the machine, have your card ready. This will save you time, and allow you to pay more attention to your surroundings.7. Be sure to take your receipt. It contains personal information, including your account number.8. Stand directly in front of an ATM. Don't let anyone see you enter your PIN or watch you make a transaction.9. Place your cash into your wallet immediately. Do not walk away with money in plain view.10. If your card is lost or stolen, report it to your bank immediately.A debit card can help your teen get cash quickly, manage spending, and teach responsible money behavior. Share these tips with your teen as they enter the adult world of finance.
Debit card thieves get around PIN obstacle
With consumers around the country reporting mysterious fraudulent account withdrawals, and multiple banks announcing problems with stolen account information, it appears thieves have unleashed a powerful new way to steal money from cash machines.
Criminals have stolen bank account data from a third-party company, several banks have said, and then used the data to steal money from related accounts using counterfeit cards at ATM machines.
The central question surrounding the new wave of crime is this: How did the thieves managed to foil the PIN code system designed to fend off such crimes? Investigators are considering the possibility that criminals have stolen PIN codes from a retailer, MSNBC has learned.
The incident calls into question the security of the four-digit code that for years has made PIN-based transactions less subject to fraud than signature-based credit card transactions.
"This is the absolute worst hack that has happened, the biggest scam to date," said Gartner analyst Avivah Litan.
In recent weeks, Bank of America, Wells Fargo, Washington Mutual and Citibank have all reissued debit cards after detecting fraudulent activity. Smaller banks, such as Ohio-based National City Bank and Pennsylvania-based PNC Bank, have taken similar steps.
Consumers complain around the countryIn the meantime, complaints from consumers who say thousands of dollars has gone from their accounts continue to multiply. Police in Erie, Pa., say they've taken reports from dozens of residents. There are more than 100 reports of fraud in Las Cruces, N.M. In Western Massachusetts, after mounting complaints, including 147 compromised accounts at the Fitchburg Municipal Employees Federal Credit Union, the state Consumer Affairs Office issued a warning about debit card fraud.
The tales of theft are consistent and disturbing.
"Last week, I was online paying some bills and noticed several ATM transactions from Toronto, Blainville ...," wrote Dana Lark of Naples, Fla., to MSNBC.com. "By the time I called my bank and reported the problem, they had gotten $1,300 of my money. I told my husband to check his business account, which has an ATM card tied to it, and he found over $1,500 of unauthorized charges from those same places and also Bulgaria."
Criminals have stolen bank account data from a third-party company, several banks have said, and then used the data to steal money from related accounts using counterfeit cards at ATM machines.
The central question surrounding the new wave of crime is this: How did the thieves managed to foil the PIN code system designed to fend off such crimes? Investigators are considering the possibility that criminals have stolen PIN codes from a retailer, MSNBC has learned.
The incident calls into question the security of the four-digit code that for years has made PIN-based transactions less subject to fraud than signature-based credit card transactions.
"This is the absolute worst hack that has happened, the biggest scam to date," said Gartner analyst Avivah Litan.
In recent weeks, Bank of America, Wells Fargo, Washington Mutual and Citibank have all reissued debit cards after detecting fraudulent activity. Smaller banks, such as Ohio-based National City Bank and Pennsylvania-based PNC Bank, have taken similar steps.
Consumers complain around the countryIn the meantime, complaints from consumers who say thousands of dollars has gone from their accounts continue to multiply. Police in Erie, Pa., say they've taken reports from dozens of residents. There are more than 100 reports of fraud in Las Cruces, N.M. In Western Massachusetts, after mounting complaints, including 147 compromised accounts at the Fitchburg Municipal Employees Federal Credit Union, the state Consumer Affairs Office issued a warning about debit card fraud.
The tales of theft are consistent and disturbing.
"Last week, I was online paying some bills and noticed several ATM transactions from Toronto, Blainville ...," wrote Dana Lark of Naples, Fla., to MSNBC.com. "By the time I called my bank and reported the problem, they had gotten $1,300 of my money. I told my husband to check his business account, which has an ATM card tied to it, and he found over $1,500 of unauthorized charges from those same places and also Bulgaria."
Saturday, August 1, 2009
Consolidating credit cards
Credit card consolidation is a popular solution for those with significant credit card debt, usually distributed on three or four different cards. Basically, this means putting all your debts together on a single card, like transferring it all to one loan. Of course, the goal is to pick a card that offers better conditions than what you already have, in order not only to simplify, but also to reduce your payments.
Since there are so many offers out there, and lenders fight over your business, you can sometimes find solutions that can save you thousands of dollars per year. If you consolidate your debt to a credit card with low interest and 0% balance transfer, you can save considerably, and pay off your credit sooner (which, of course, is the main goal when dealing with credit card debt).
The most serious mistake people do when consolidating is to go though the entire process just to simplify their accounting, and they don't pay enough attention to how much they could save. Another mistake is to close your zero balance accounts when consolidating. This practically means you close some of your credit options, which is never a good idea.
When you plan to consolidate, call your banks and explain the situation. They want your business, and you'll be surprised how flexible and willing to negotiate they can be, once you explain to them that you have various options available to take your business someplace else.
There are many web sites offering solutions for debt consolidation. However, keep in mind that, while this is a comfortable and fast solution, you don't have the options to negotiate directly with the banks. Also, most often the best offers come from banks that want to keep your business, so make sure you give a change to the banks you've had a long-term relation with. If you're not pleased with the results, take your money elsewhere quickly.
Consolidation is often a necessity for students, new graduates, or people who have filed for bankruptcy some time ago. If you've handled your payments well and managed to clear up your record to a certain degree, there is no need to continue paying more than it's worth for your credit cards. Sit down and go through the numbers carefully, and think analyze the problem realistically. Don't forget to check your credit report and your credit rating before you start anything - it will help you plan and plead your case. Also, if your credit request gets rejected, don't forget to ask for your free copy of the credit report.
Of course, credit card consolidation is not a miracle solution for all your financial problems. On the contrary, you may find that it requires a lot of financial discipline to make the payment on time and to straighten things up. However, it is less confusing than having several small credits, and so it is easier to keep things under control.
There is also the option of getting credit counseling, if things get really confusing. A successful plan will make sure you make the payments on time and regularly, without putting a strain on other aspects of your life. Of course, it's a lengthy process, usually taking one or two years - but it's worth the trouble.
Sometimes, you can lower costs by consolidating your debt through a second mortgage - but be really careful about the hidden costs and problems - you may want to consult with a specialist or two before taking this step. Usually, this means that your home will become collateral, and you may lose it if things go wrong. Also, costs add up quickly and you may end up paying more than you initially thought.
Since there are so many offers out there, and lenders fight over your business, you can sometimes find solutions that can save you thousands of dollars per year. If you consolidate your debt to a credit card with low interest and 0% balance transfer, you can save considerably, and pay off your credit sooner (which, of course, is the main goal when dealing with credit card debt).
The most serious mistake people do when consolidating is to go though the entire process just to simplify their accounting, and they don't pay enough attention to how much they could save. Another mistake is to close your zero balance accounts when consolidating. This practically means you close some of your credit options, which is never a good idea.
When you plan to consolidate, call your banks and explain the situation. They want your business, and you'll be surprised how flexible and willing to negotiate they can be, once you explain to them that you have various options available to take your business someplace else.
There are many web sites offering solutions for debt consolidation. However, keep in mind that, while this is a comfortable and fast solution, you don't have the options to negotiate directly with the banks. Also, most often the best offers come from banks that want to keep your business, so make sure you give a change to the banks you've had a long-term relation with. If you're not pleased with the results, take your money elsewhere quickly.
Consolidation is often a necessity for students, new graduates, or people who have filed for bankruptcy some time ago. If you've handled your payments well and managed to clear up your record to a certain degree, there is no need to continue paying more than it's worth for your credit cards. Sit down and go through the numbers carefully, and think analyze the problem realistically. Don't forget to check your credit report and your credit rating before you start anything - it will help you plan and plead your case. Also, if your credit request gets rejected, don't forget to ask for your free copy of the credit report.
Of course, credit card consolidation is not a miracle solution for all your financial problems. On the contrary, you may find that it requires a lot of financial discipline to make the payment on time and to straighten things up. However, it is less confusing than having several small credits, and so it is easier to keep things under control.
There is also the option of getting credit counseling, if things get really confusing. A successful plan will make sure you make the payments on time and regularly, without putting a strain on other aspects of your life. Of course, it's a lengthy process, usually taking one or two years - but it's worth the trouble.
Sometimes, you can lower costs by consolidating your debt through a second mortgage - but be really careful about the hidden costs and problems - you may want to consult with a specialist or two before taking this step. Usually, this means that your home will become collateral, and you may lose it if things go wrong. Also, costs add up quickly and you may end up paying more than you initially thought.
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