Debit Card Vs. Credit Card

The use of debit cards has quickly become a more common form of payment than writing checks or using credit cards.  If you use a debit card, it is important you know how it works and what to do if you have problems.

A debit card is different from a credit card in that the funds are deducted immediately from the account, whereas a credit card uses a line of credit that is repaid at a later time. (Read consumer complaints about credit cards).

A debit card is issued by a bank to its customers.  The card allows instant purchases and the total purchase price is immediately deducted from the user’s attached bank account (a “pay as you go” approach).

Using the debit card

Most debit cards have two features: the ability to withdraw cash from the associated bank account at an Automated Transaction Machine (ATM) and the ability to purchase items at stores that have automated debit or credit card machines.  Most debit cards require a personal identification number or PIN as a security feature. 

When using your debit card at a store or an ATM, you usually have to enter your PIN for verification.  Some bank debit cards have a third feature: the ability to complete a purchase as a “credit” transaction, using only a signature. Although no PIN is required, the purchase price is deducted immediately from the associated bank account.

If you are using your debit card for an online purchase, the PIN may not be required, but you will often need to enter the three or four digit security code for the card.

ATM fees

It's important to keep in mind that many banks charge fees for using your debit card at an ATM. Most banks don’t charge the fee if you have an account at that bank. But if you are a "foreign" user -- someone without an account -- you could pay a hefty charge.

In fact, there has been so much anger over ATM fees that there have been efforts  on the federal level to cap them. Last May an attempt to limit the fee to $0.50 was defeated in the Senate.

Use with caution

Be very careful when using your debit card online!  To commit debit card fraud, all a thief needs is your card number and PIN. This allows the thief to gain access to your bank accounts. Debit card fraud can be even more devastating in some ways than credit card fraud, since in this case the criminal gains access to the money you are using for every day spending. 

When shopping online, always make sure that you shop online at merchants who have secure shopping carts. Instead of using your debit card to shop online, a safer alternative is to use online bill payment for your purchases or use your credit card.

If you have become one of the millions who regularly use a debit card, it is essential that you monitor your bank account.  Don’t wait for your monthly statements to determine if there has been unauthorized use of your account. 

Liability

You can easily check your account online once you get it set up.  Federal law limits your liability for fraudulent debit card charges to $50, but only if you report the theft or loss of your card or PIN within two business days of discovering the problem. 

If you fail to report unauthorized charges within 60 days of the date the statement listing those charges were made, you could be liable for any unauthorized withdrawals afterwards.

When you are a victim of unauthorized charges on a credit card, you won’t be out any money while the disputed charges are being investigated.  But if money is stolen from your bank account using a counterfeit debit or ATM card transaction, that cash won’t be restored to your account until the bank conducts its investigation and classifies it as a case of fraud.

If you find yourself in a situation where your debit card has unauthorized usage, North Dakota Attorney General Wayne Stenehjem’s Consumer Protection and Antitrust Division offers these tips:

• Contact your bank immediately after learning that you are the victim of a scam.  Ask for the fraud or claims department and be sure to find out the date, time and any other information about the transaction.  Write all of the information down for future reference.
• Your bank will more than likely put a freeze on your account -- or you may close that account and open another one.  It is important that you contact any people you have made recent payments to or have incoming payments from to let them know about your situation and that the account has been frozen or changed.
• Contact the business or vendor who made the charge.  Request a copy of the signed receipt and any other information they can provide you about the purchase.  Let them know you will be reporting the situation to your local law enforcement agency.
• Contact your local law enforcement agency to file a report, providing the agency with all of the information you have been able to gather.
• It is extremely important that you keep a file of all the calls, reports and conversations you have had with the various businesses, banks, law enforcement, etc.  You will need to continue following up on your account transactions in the future.

Remember, a debit card is not protected with the same liability clauses as your credit card.  You may be liable for some portion of the fraudulent charges.  If you feel concerned about using your debit card for a transaction, may wish to use your credit card instead, as most credit cards have more protections than debit cards.