Debit Cards

There are two ways to make payments on a Web site: debit cards and credit cards. Pull out your ATM card. Chances are it is a debit card with a Visa or MasterCard logo. Debit cards are upgraded ATM cards branded with the Visa, MasterCard, or other familiar credit card company logo. They look exactly like credit cards, except they directly tap your checking account every time you make a purchase or a withdrawal. They are easier, more convenient, less burdensome, and offer greater access to your! money than do checks, ATMs, or credit cards. They are descendants of the ATM cards that became popular in the early 1980s. Debit cards are different, however, because transactions are processed through the issuing

Debit cards can be used with or without a personal identification number (PIN) almost everywhere-retail stores, gasoline stations, restaurants, pay phones. When used without a PIN (calledan off-line transaction), the procedure is simple. The merchant's terminal -reads the card and identifies it as a debit card that creates a debit against your bank account. Because the transaction is off-line, instead of debiting your account immediately, there is a 2- to 3-day wait before final processing.

When a debit card is used for off-line transactions, as in the case of retail purchases, a thief can find a way to drain your account simply by getting hold of a receipt. The thief does not actually need your card; your card number is sufficient to commit the fraud. Unlike credit cards, where your liability for a stolen card under the law is $50, your liability for debit card fraud is higher. It is $50 if you notify the bank within 2 days of learning of the fraud, and $500 or more after 2 days, up to the entire amount stolen under certain circumstances. Worse, regardless of the liability, the thief has your money and you may have to fight to get it back from the bank. In the case of credit card fraud., you simply talk with the bank about getting disputed charges taken off the bill.

When a debit card is used with a PIN, as in using an ATM machine, it is called an online transaction. You simply insert the card in the machine, enter the PIN number, and proceed as you do when using an ATM card.

Today's banks are pushing hard to replace the ATM card with a debit card without asking customers if they want one. The reasons are obvious. There are more merchants with credit card readers than PIN-based readers. Banks also make more money through off-line debit cards in percentage fees or discounts from the merchant. Both banks and merchants make more money and have lower risks than when you write a check because there are no check-clearing costs, less float time, and no checks to bounce.

All debit card purchases are reflected in the monthly hard copy statement the bank mails each customer for reconciliation. See w-ww.pirg.org/consumer/banks/ debit/fact/htm and www.bbb.org/library/debitcard. asp. It is estimated that by the year 2001, two-thirds of American households will have a debit card.

According to the National Consumers' League, here is what you need to know about debit cards:

1. Using a debit card frees you from having to carry cash or a checkbook. You don't have to carry traveler's checks, show identification, or give out personal information at the time of the transaction.

2. Debit cards are more readily accepted by merchants than are checks, especially in countries where check cashing and check processing, are not widely used.

3. It is generally easier to get a debit card than a credit card. You can get a debit card the moment you have a checking or a saving account.

4. Returned debit card purchases are treated just like returns for items purchased by cash or check.

5. The debit card is a quick pay now process. There is no grace period as there is for credit card payments.

6. A major problem at this time is that using a debit card may mean less protec tion for items that are never delivered, for defective items, or for items that were misrepresented. With credit card purchases, you can contest the charge and put a hold on payment within 60 days.

7. A cardholder might overspend his or her limit before anyone finds out. Retailers do not have verification machines to see your bank account balance before the sale. During busy times, most retailers process small sales on faith. For more information, visit the National Consumers League site at www.natlconsumersleague.org/debitbro.htm and Holmes "Debit Cards: Their Value In An Incentive Program", 1-4.www.info-now.com/html/3040debl.asp.

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