Personal Financial Tips

Archive for the ‘Debit Card Protection’ Category

Know somebody whose birthday is coming up and you need to buy them a gift? Or, maybe you need to buy someone a congratulations, graduation, thank you, or special holiday gift. It can be hard to know exactly what to buy that special person.

Gift-giving is not as easy as one might expect. You would think it would be a cinch, what with the thousands of products and services available online or in nearby department stores. In reality, though, the more choices you have, the harder shopping becomes.

Compounding the problem is that, in the modern era of instant gratification, most people of any means at all will just go out and buy what they want or need. Translation: anything you could buy this person that they would actually want – they likely already have.

Traditionally, the solution to the problem of what to give someone as a gift has been solved by giving the gift of cash. Stuffing a midsize or large bill into an envelope with a card has been a socially-accepted way of giving gifts for decades. Trouble is: it’s a bit boring and uncreative.

So, what can you do if you are stuck between the inability to choose amongst a million products on the one hand and the choice to give boring old cash on the other? Answer: give them a debit gift card.

Debit gift cards are simply pre-paid cards that carry the symbol of a major credit card issuer like Visa, American Express, or MasterCard. The recipient uses them just like a credit card, right up to the denomination or value with which it was originally loaded.

If you are considering buying a debit gift card, here are 5 reasons they are better than giving products or cash:

1. Safer than giving cash:

Cash can get lost or stolen. But, with a prepaid debit card, if it is lost, the recipient can choose to immediately call in the card number to get the card frozen from making future purchases. You can’t do that with cash!

2. Debit cards are more fun to receive than cash:

When it comes to gifts, receiving a prepaid gift card feels a lot more exciting than just getting cash. It gives the impression that you put some extra forethought into the gift, rather than just pulling some cash out of your wallet and sticking it into an envelope. Plus, unless you went to the trouble of getting them a crisp, new bill from the bank: cash is just plain dirty – quite literally.

3. Offers protection against damage or loss of purchased items:

Most prepaid debit gift cards come with product purchase protection. This means that, if the recipient should make a purchase of certain goods and they get lost due to theft or are damaged within 90 days, the issuer will cover the replacement costs. (Check your card’s policy for details before buying).

4. No need to run a credit report or apply:

Of course, to use a traditional debit card you need a bank account, and to use a credit card you must go through a lengthy credit application. Not so with prepaid gift cards! You can buy one over the counter or online and have it shipped directly to the recipient.

5. They can check their balance online or by phone anytime:

If the recipient needs to know their balance, they can check anytime by calling the phone number provided with the card. The same number can also be used to report the card if it is stolen.

Consider these 5 benefits of giving someone a prepaid debit card as gift instead of products or cash.

As society increases it’s reliance on technology, consumers are the inevitable benefactors of increasingly convenient shopping solutions. The use of the personal credit and debit card has become extremely common in recent years. It’s virtually unheard of to find a merchant who doesn’t accept major credit cards, and they are increasingly required to complete certain transactions, such as online shopping and most travel reservations.

Most people don’t have problems with these requirements, but for people who can’t qualify or don’t wish to have traditional credit cards, prepaid credit debit cards are a great option.

Before applying for a prepaid card, however, it’s prudent to examine the situation and ensure that it’s really the best option. For an individual who is able qualify for a traditional credit card, it’s probably more helpful in the long run to use the traditional method. Prepaid cards cannot build a person’s credit history, which will be necessary for larger purchases such as cars and homes.

Additionally, since “loading” the prepaid card requires parting with the cash upfront, a family or individual with a tight spending situation needs to be careful to ensure they will still have the cash flow necessary to pay other bills in a timely manner. Also, if prepaid credit debit cards are used on a repeated basis, the user should ensure that whatever card is chosen offers convenient reloading options.

Generally speaking, prepaid cards are more beneficial to user’s who can’t qualify for a traditional credit card, usually because of credit problems. Some banks also require debit card users to pass certain checks, which may limit usage of debit cards for some individuals as well.

Prepaid cards can also be a good idea for anyone who is looking to tightly control their spending. Overspending is not an option with a prepaid credit debit card, since there is no overdraft protection and no line of credit is actually being extended. Before applying, users should be aware of a few things. First, it’s important to fully understand the fees associated with opening an account and, sometimes, with reloading the card. Users should also double check the spending (or loading) limit on the card of their choice.

The CARD Act that went into effective on February 22, 2010 has resulted hundreds of changes to credit cards but did you know that the CARD also affects debit cards? Well here are some changes about debit cards you should know about. These new changes implemented by the Federal Reserve went into effect on July 1, 2010. Your bank should be sending you very soon an explanation of their new overdraft services including fees and changes.

Currently, for standard overdraft services your bank will cover the transaction by charging a flat fee of $20-$30 each time you overdraw your account (bounce a check or use your debit card). If you have an overdraft protection account or service your bank provides a line of credit that is linked to your savings account to cover transactions when you overdraw your account. Banks charge a fee each time you overdraw your account but using the overdraft protection service may be less expensive than using the standard overdraft service.

Under the CARD act, your bank can no longer charge overdraft fees. Your bank must get permission to apply the standard overdraft services to debit and ATM card transactions. You can grant permission by opting in to the overdraft notice your bank sends you.

For existing accounts if you do not opt-in by August 15, 2010, your bank’s standard overdraft services won’t apply to your debit and ATM transactions and future transactions will be declined when you don’t have enough money in your account, and you will not be charged an overdraft fee.

For new accounts opened on or after July 1, 2010, your bank can no longer charge overdraft fees for debit and ATM transactions unless you opt-in. If you open a new account before July 1, 2010 your bank will consider you an existing customer and you will receive a notice about your bank’s overdraft services.

Determine if you want the standard overdraft services for debit and ATM transactions. If you decide to opt-in you can cancel at any time. If you do not opt-in before the deadline you can opt-in in the future.

The new overdraft guidelines do not affect checks or automatic bill payments. Your bank may automatically enroll you in their standard overdraft services plan for these transactions. Contact your bank if you decide to cancel the standard overdraft service to verify what options are available.

New Federal Reserve rules take effect July 1st to give consumers more protection against bank overdraft fees on debit cards. Up until now, many banks automatically offered overdraft “protection” for debit cardholders. That meant that if a debit cardholder had insufficient funds in his or her account to cover a purchase or ATM withdrawal, the bank would allow the transaction to go through, but then could charge an overdraft fee. A study of 462 banks by the Federal Deposit Insurance Corp. showed that overdraft fees range from $10 to $38, with a median average of $27.

Overdraft fees on debit cards generated more than $20 billion for banks in 2009, according to the New York Times. Banks earned another $12 billion overdrafts caused by check writing, which this law does not address.

A study by the Greenlining Institute, a think tank focused on multiethnic public policy, indicates that bank overdraft fees hit low-income consumers and people of color the hardest. That’s because people new to banking and/or with low incomes tend to maintain low bank balances. These are the very bank customers who can least afford to bear the burden of extra fees.

Under the new law, consumers must opt-in for overdraft protection on debit cards. Without it, a debit card transaction would simply be declined at the point of sale if there were not enough funds in the account to cover a purchase. For transactions that did go through and the bank would have to cover the overdraft without charging a fee. To protect their lucrative revenue stream, banks are beginning to send out alarming marketing messages urging debit card holders to opt into an overdraft service or risk not having to make payments “even in an emergency” that result in overdrawn accounts.

Overdraft Charges: Banks Game the System

The Greenlining Institute report also points out that many banks have gamed the system to maximize the fees they can collect by “reordering” purchases in a given day to count the most expensive one first. This way, they raise the chance that each additional purchase can count as an overdraft if the highest purchase of the day wipes out your account balance. For example, let’s say you have $100 in your account. You use your card to buy lunch for $10, you fill up your card for $30, you buy clothes for $50, and then you pay a bill for $60. If the bank processed these transactions in the order that they were made, only the last charge would be counted as an overdraft. But by processing the $60 and $50 transactions first, the bank then counts the $10 and $30 transactions as overdrafts and charges you two overdraft fees instead of one.

The Institute concluded that despite changes in the law, overdraft fees are still too high and continue to affect low income consumers disproportionately. With widely varying policies among banks, and hard to follow fee structures, consumer continue to be at risk for being hit with unexpected and costly charges.

Few Prepaid Debit Cards Allow Overdrafts

Because prepaid cards are not tied to a checking account, prepaid card issuers are not inclined to allow overdrafts or collect overdraft fees. This is because cardholders could potentially make a purchases with insufficient funds on a card and then fail to load money onto the card to cover the overdraft. Thus, when an attempted purchase is greater than the amount of funds available on the card, the transaction will simply be declined. This is largely seen as a benefit by prepaid cardholders. Prepaid cards are a positive alternative for consumers who have been denied checking and have trouble obtaining a credit card or other kind of debit card.

The biggest risk associated with ATM or debit cards is identity theft done by way of stolen PINs. To access your bank accounts, identify thieves typically have several ways of obtaining your PIN.

One way that an identity thief can obtain your PIN is if you write down your PIN and keep it together with your ATM or debit card. Never have your PIN and debit card in the same place. If someone steals your pocketbook or wallet, he will be able to use your ATM or debit card. An ATM or debit card is useless unless the PIN is also in the thief’s possession. With the combination of your card and PIN, the thief would be able to use your accounts as easily as you could.

Another way that an identity thief can obtain your PIN is by watching you use your ATM or debit card or by overhearing you give your personal information. In reality, you are at the greatest risk of exposing your PIN when you are in a crowded place. It is very difficult to safeguard your PIN when people are standing very close to the ATM you are using or when you have to enter your PIN by a cash register.

Thieves get very close to you and “shoulder surf” as they watch you input your PIN into the machine. Of course, even if you trust the person you give your PIN to, is everybody near you who might overhear your conversation also as trustworthy?

Keep in mind that when a thief obtains your ATM or debit card’s PIN, his next step is to try to steal your ATM or debit card from you. If a thief obtains your PIN, he is likely to try force in order to get the ATM or debit card. You need to be careful because a thief watching you enter your PIN or hearing you give your PIN could cause you physical injuries.

The third way that identity thieves obtain PINs is rather technical in nature. The police refer to this type of ATM or debit card theft as “skimming.” Identity thieves use a magnetic strip card reader or a keyboard logging device and attach it to an ATM machine. These devices capture your ATM or debit card; they are very advanced, look very much like a regular card swiping device and will fool most people.

Unsuspecting folk will swipe their ATM or debit cards in these devices, thinking that they are using the real thing. Now that the thieves have your personal information, they won’t need your ATM or debit card. They will make a “new” card which will look similar to your card.

Another skimming technique is done at the store, when you are the cashier. This method is much more difficult to do, but it does happen. This is when the cashier swipes your ATM or debit card a second time. You can protect yourself from this type of ATM or credit card identity theft by remaining alert to your surroundings and the things that are happening.

As long as you are able to safeguard your PIN, you should be able to protect you debit card. As soon as you suspect that your PIN has been compromised or if you misplace your card or even suspect that it has been stolen, contact your bank immediately. Your bank will issue you a new ATM or debit card and you can choose a new PIN.

No matter how you use a debit card, whether the ‘credit or debit’ route, some of the features work the same. Your purchase amounts will be withdrawn from your checking account, covered by fraud
protection and can be tracked on a monthly statement or online account.

Quick Reference:

Choosing “debit” gives you:

oThe faster way to check out, in most cases.
oThe ability to get cash back when you pay for your transaction.
oAccess to self-service checkouts or merchants that only accept PIN transactions.

Choosing “credit” gives you:
oAccess to more merchants. Three times as many stores accept signature-based debit purchases when compared with PIN purchases.
o”Chargeback” protections that allow you to get your money back promptly if there is a dispute with the merchant.
oOpportunity to earn reward points.

Be Aware of the Differences
When you choose to answer ‘debit’ you will verify your identity by submitting your personal four-number password or PIN (personal identification number). Choosing the “credit” option means you plan to sign a receipt instead of entering a PIN. You get a copy of the signed receipt just like when you use a standard credit card.

As far as safety is concerned paying by PIN is regarded as more secure because it’s harder to guess or steal a password than to fake a signature. But paying by the ‘credit’ option may be the only option available if the merchant doesn’t provide a PIN pad.

The Merchants’ Preference
The best choice for the merchant is for you to use the ‘debit’ option and enter a PIN to verify your identity because their costs are lower. Some merchants only accept debit cards and some will program the PIN machine to automatically be prepared for your PIN input or require the cashier to enable a signature-based transaction.

Credit unions typically prefer your signature identification because they will earn higher fees when their members choose the ‘credit’ option. Members benefit with lower fees and often fee-free debit transactions.

Beware of Hidden Fees
It’s quite a shock when your bank statement arrives and you notice ten service charges for $1.50 each only to find out that you have been charged for each ‘debit’ transaction you’ve made during the month. Read the fine print before you use any debit or credit cards so that you aren’t caught by surprise.

Fees can be to either type of purchase. Some banks charge a fee for every PIN transaction and they can add up to pretty hefty losses. Some merchants charge a fee to consumers who say “credit” when paying with a debit card. There also may be a limit to the number of free debit card transactions allowed each month.