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BANKING & CREDIT -
Credit & Debit Cards (continued)
4. Recently debit cards have become popular, and for some individuals have replaced credit cards (and checks) as a principal form of payment. Here are some of the advantages and disadvantages of debit cards.
a. Debit cards are basically an easier way to use your checking account, except there is absolutely no delay in funds being subtracted from your account. Just make sure you keep track of the funds spent so you know what is left in your account.
b. With respect to managing your money, debit cards are self disciplining, as compared to credit cards. With a debit card, you can only spend what you have and do not risk borrowing money for your purchases, as you can with a credit card if you cannot pay your monthly credit card bill. On the other hand, you do not get any of the benefits of float that credit cards provide.
c. Debit cards may or may not offer some of the benefits (like extended warranty, etc.) of credit cards that were listed earlier. Check with your debit card provider.
d. Make sure you understand what liability and problems you might have if somehow your debit card has unauthorized charges. The $50 limit on liability for credit cards may or may not apply. Your losses could be a lot higher. In any case, remember, a debit card can access whatever balance is in your checking account, and any charges are deducted immediately. So, instead of just disputing charges on a credit card, you actually need to get the debit card company to refund your money. Sometimes this can take a while, and during this wait you do not have the money to use. So be careful, and ask your debit card company their policy on losses from unauthorized use. Check to see if “debit” card insurance is available and if it makes sense, given the protections already provided with the card.
e. Since the merchant gets your funds immediately upon purchase, your ability to have any leverage (such as you would through a credit card company) for purchases that are unsatisfactory is limited.
f. Debit cards are handy if you need additional cash. Many stores will allow you to charge your debit card for more than the purchase, and they will give you the difference in cash. This can save on ATM fees.
Most people use banks or credit unions for everyday checking and savings account services, as well as a place to invest funds on a secure basis. Banks make a considerable part of their income through charging fees for their various services, as well as their ability to attract investments at low interest rates and lend money at high interest rates. With a little diligence, the fees paid to the bank can be minimized, interest earned can be maximized, and interest paid can be reduced. Consider the following:
1. Most everyone has a checking account. But not everyone pays a fee for their checking. Ask your bank if they have a free checking account that does not require a large checking account balance. If not, ask them to waive the fees or shop around for a bank that does have true free checking. They do exist.
a. When shopping for a bank account, also consider if there are fees for ATM cards, as well as debit cards. These fees vary widely and a little shopping around should save some money, without any deterioration in service levels.
b. Sometimes checking account fees are waived if you have direct deposit of your pay check. Direct deposit really is easier and just as safe as paper checks (perhaps safer since checks can be lost). It is also faster and saves money on gas.
c. Make sure you get a checking account that meets your needs. Some people write a lot of checks, some a few, etc. Get the right kind of account for you.
d. Ask your bank if they have any special deals for senior citizens or students, or any other special deals available.
e. Some times checking accounts even include free checks. If so, great. If not, check the cost of checks purchased through your bank with checks purchased through check printing services. Checks are available through mail order companies and on the Internet, and may save you up to 50% of the cost.
f. Most banks offer free electronic banking, including free on-
g. Make sure your bank does not charge transaction or other fees for use of your ATM card at their ATM machines. Also, see if they charge a fee for using your card at another banks ATM which is in addition to the other bank’s ATM fee. And try not to use your ATM card at another bank in order to avoid their fee.
h. Make sure you balance your checkbook regularly and avoid overdraft fees. Consider not having any automatic deductions from your checking account for bill payments, to help ensure you do not have an overdraft. Consider getting overdraft protection. Ask your bank.
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