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What You Should Know About Debit Cards When you use a debit card, money is deducted directly from your checking or savings account. The card is run through a scanner and the bank electronically verifies that the funds are available before approving your transaction. A debit card may be an on-line card or an off-line card or both. An on-line debit card is similar to an ATM transaction. A personal identification number (PIN) is required. Funds are immediately transferred from your bank account to the merchantís account. You can also use your on-line card to withdraw money from an ATM. An off-line debit card is also known as a check card, because it is similar to the way a check is signed and paid. The card is run through a scanner, but instead of entering your PIN, you sign a receipt like a credit card sale. The funds aren't deducted from your account for a few days. Debit cards have several advantages. You don't have to show identification to use them. You don't have to carry cash or a checkbook. You don't pay interest charges. Merchants like them because checking out is faster and easier and their processing fees are usually less than credit card fees. Debit cards also have several disadvantages. You must have enough money in your bank account to cover the transaction. You do not have the option of stopping payment in a disputed transaction. Most importantly, you have less protection than with a credit card or a personal check. A debit card is like a blank check. If you have an off-line card, a thief can empty your bank account with or without your card without knowing your PIN. If your off-line card is stolen, it can be scanned and your name signed on the receipt. But your card doesn't have to be lost or stolen to be used for unauthorized transactions. For example, if the transaction is by phone or over the internet, all the thief has to know is your card number. If your card is stolen and you report it within two days of the time you discover the loss, you will be responsible for $50 of the loss. If you report the loss more than two days after, but within sixty days of the discovery, your liability is limited to $500. If you don't notify your bank within sixty days, your liability is limited to the amount of money you have in your account. You could lose all the money you have in the bank or more if you have overdraft protection. One exception is if your debit card bears a Visa or MasterCard logo, the required loss cap is $50. If your card is not lost or stolen but unauthorized transactions are made with it, you must report any unauthorized transactions within sixty days. If you do, you are not liable for the amount of any unauthorized own money back. Before you obtain and use a debit card, you should decide if the risks outweigh the benefits. Since many banks automatically send you a combination debit/ATM card, if you decide you don't want a debit card, ask your bank to replace the debit card with an ATM card with necessary security protections. If you have a debit card, the following will help you avoid liability for unauthorized transactions:
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