With a debit card and personal identification number (PIN), you can use an Automated Teller Machine (ATM) to withdraw cash, make deposits, or transfer funds between accounts. Some ATMs charge a fee if you are not a member of the ATM network or are making a transaction at a remote location.
Retail purchases can also be made with a debit card. You enter your PIN or sign for the purchase. Some banks charge customers a fee for debit card purchases made with a PIN. Although a debit card looks like a credit card, the money for the purchase is transferred immediately from your bank account to the store's account. When you use a debit card, federal law also does not give you the right to stop payment. You must resolve the problem with the seller.
If you suspect your debit card has been lost or stolen, call the card issuer immediately. While federal law limits your liability for a lost or stolen credit card to $50, your liability for unauthorized use of your ATM or debit card can be much greater, depending on how quickly you report the loss.
- If you report a debit card missing before it is used, you are not responsible for any unauthorized withdrawals.
- Your liability is limited to $50 if you report the loss within two business days after you realize your debit card is missing and to $500 if you report the loss after two but before 60 days.
- If you have not reported an unauthorized use of a debit or ATM card 60 days after your bank mails the statement documenting the unauthorized use, you could lose all the money in your bank account as well as the unused portion of your line of credit established for overdrafts.
Check the policies of your card issuer. Some offer more generous limits on a voluntary basis.
New Federal Reserve rules give debit and ATM card users additional protections covering overdrafts. Generally, banks cover your overdrafts by charging you a fee or offering an overdraft protection plan, similar to a line of credit. Under the new rules, if your bank pays overdrafts, you have the option to opt into this service for most ATM and debit card transactions. Banks must disclose this option, the amount of the overdraft fee, and the customer's right to cancel this service.
Before You Swipe Your Debit Card
Although both credit cards and debit cards are easy ways to pay for your purchases, debit cards have some different levels of consumer protection and the potential for consumer fees. Debit cards are directly connected to your bank account, so when you swipe your card make sure that you have the money in your account to pay immediately. If you don't have enough money in your account, your bank may "loan" the money and pay the overage. However they may charge you up to $35 for this courtesy, even if the dollar amount the bank covered was small. There may also be fees applied to your card when you use your card with your PIN.
Debit cards don't offer as much protection against fraudulent use, or if your card is lost or stolen. Also, if you need to dispute a purchase, you are in a weaker position because the merchant already has the money and it will only be returned if you win the dispute.
Another fact to keep in mind is when you use your debit card to make reservations for hotels or rental cars, a hold is placed on your debit card (and your checking account) which can affect your other pending transactions. Even if the hold is removed, it may take as long as a week to make the funds available to you again.