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What Is A Debit Card?

By Jacobey Larstons on November 14, 2011

A debit card is made from plastic and issued as a Visa or MasterCard. It will provide electronic access to your bank account. It is essentially the same as carrying cash or a checkbook. Some even provide rewards, but these have seen drastic cutbacks lately as a result of legislation limiting fees banks can charge merchants.

There are two types of systems used to process these transactions. The first is an online system. It processes an electronic authorization for every transaction. The benefit of this is that the withdrawal is reflected immediately. These systems generally require you to enter a PIN (personal identification number) to authorize the transaction.

The second type is the offline system. It is used at the point of sale, and must be authorized with a signature. The disadvantage to this system is that funds are not immediately withdrawn and can take two or three days to be reflected. Similar to writing a check, you must ensure you are keeping track of these transactions so as not to overdraft your account.

While it can prove to be very useful and convenient, there are a few times when you should think twice before it, or use it with caution. The reason for this is that it is directly linked to your bank account. If it is stolen and used successfully that money is gone for the time being, whereas with a credit card you can dispute the transaction and withhold payment. The Federal Electronic Fund Transfer Act (EFTA) provides you some protection if it is lost or stolen, but there are time limits.

Your liability is limited to $50 if you notify the bank within 2 days of discovering the theft. After two days you are liable for $500 and after 60 days you have unlimited liability for the charges. Some, but not all, banks will not hold you liable if you report it in a timely manner, but it is a big risk.

The times when you should think twice before using it are when you are not sure of the merchant's security, or if it will leave your sight, such as at a restaurant. It is also advisable to use a credit card for big purchase items, such as a television or appliances because it will generally provide you with a better level of protection should you have a problem with the purchase.

If you are using it to make purchases where the final bill is uncertain, you should be aware that merchants will place a hold for the amount of funds they believe you will spend. For example, when you scan your card to pay at the pump for gasoline, the merchant will pre-authorize it for $50. If you only spend $20, the $50 charge will stay on your account for an undetermined period of time, typically a few days. This will lower you balance of available funds, but you did not spend the money so the difference of $30 will be returned.

These are just a few cautions of which to be aware. Overall, they can be a valuable financial tool when used properly. Hate carrying around cash because it's seems to get spent too fast? Or writing a check and waiting for the funds to clear or worrying about the check bouncing and having to pay fees? If so, a this card might be an option worth considering.

To learn more about what is a debit credit card and which offer we believe is the best available visit us additionally you can find a review of the popular prepaid rush prepaid card and other helpful finance information.

Original article published on SooperArticles.com

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