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Author: FreeCashFlow Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 308365  
Subject: Debit cards: What's the point? Date: 6/24/1998 9:13 PM
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I don't understand the boom in debit cards, which automatically deduct money from your bank or brokerage account each time you use the card. True, you don't have to worry about paying them, but if you have the money, is it really that hard to write a check and send off your payment each month?

Don't hotels and rental car agencies require credit cards? Doesn't mail order require a credit card?

Furthermore, debit cards are riskier than credit cards. It's harder to dispute charges on debit cards than charges on credit cards. At least if you have a disputed credit card balance, you don't have to pay the disputed part of the balance, leaving you in a better position to negotiate. For this reason, it is recommended that you pay for hotels and car repairs with a CREDIT CARD so that you have some negotiating power for recourse in the event of bad service. If you dispute a debit card payment, the pressure is on you, because the money in dispute isn't yours until it the dispute is settled in your favor.

Furthermore, if there is fraud, a glitch, or another snafu involving your debit card, this can trigger a chain reaction of other problems at your bank or brokerage account, such as falling below the minimum balance and bounced checks. If the snafu involves a credit card instead, at least you can dispute it and be off the hook during the dispute. In the event of fraud, your liability is limited to $50. On the other hand, debit cards don't have such limited liability protection.

Even more dangerous is the idea of tying a debit card to a brokerage account, which presumably has the bulk of your life savings. You risk having a snafu wipe out your life savings.

Yes, I know about the loanshark interest rates and annual fees charged by credit card companies, but you can bypass them by only using no-fee credit cards and paying off your balances in full and on time.
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Author: emtwo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2715 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/24/1998 9:29 PM
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While I agree that the Debit Card is not the end all card, there are some DEFINATE advantageous uses.

1. NOT having to write a check. I hate writing checks, and even worse, having to paste 32 cents postage on an envelope, so it can take 4 or 5 days for it to get to the payee.

2. Combined with on-line bill paying, they save time, money, and aggravation.

3. Cuts down on impulse spending (IMHO), by alleviating the need to carry cash around. They are accepted where ever a VISA or MASTERCARD are accepted, and I use mine extensively on business trips, as it provides a convenient way to make purchases wherever you are, and makes it EXTREMELY easy to track your spending, as you have all purchases listed on your bank statement each month.

In defense of credit cards, I also use mine extensively when traveling. I skip the over-priced car-rental insurance, because my platinum card provides it for me. Any high dollar gifts or items purchased while on the road, if broken, are replaced free of charge if purchased with my platinum also.

just my 2cents

v/r

Michael

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Author: Rogue31 Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2716 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/24/1998 10:32 PM
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Michael,

Haven't spoken directly to you before, but I agree with all of your statement on this. One more note, however.

For a while, I had bad enough credit (I was young and very unFoolish (or is that Wise beyond my years?)) that prevented me from getting a card. I was however, able to get a debit card from my bank. I did some travelling, and hotels would NO accept a reservation without a credit card. Uh-oh! Not to worry, though. They accepted my debit card without a problem. And I could either decide to put the charge for the room on the debit card, or pay cash. The hotel sometimes seemed confused by the odd green and black pieces of paper I proffered to settle my bill, but after a moment or two, recollection kicked in and they recognized the archaic form of payment and accepted this willingly.

So, as you stated, debit cards do have their place right alongside a credit card. I have one of each, and they complement each other quite nicely.

Rogue31

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Author: Bottles Two stars, 250 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2717 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/24/1998 11:36 PM
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Freecashflow,

First intersting name...

Sorry have to disagree with you on some points...

I do agree that debt cards are not the panecea and are just as dangerous as credit cards. For one the Debt card I have acts just like a visa card, even says VISA on it.

The part I disagree with is where you state what happenes with fraud. The likeliness of fruad in either situation, either a CC or a Debit card to me is equal. Granted the effects are different but both can be equally bad and just as frustrating to resolve.

Personally for me its help us put out cards on wraps unless we absolutly need the CCs. For that right now its invaluable. Help ween ppl from Credit dependancy if you ask me.

bottles
Rob

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Author: elizanne Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2720 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/25/1998 10:57 AM
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I have a story related exactly to this. My mom set up one of those cash-management accounts with USAA (some pretty big bucks), and they had sent her a debit card. She thought it was a regular atm card. Well, USAA called here just a few weeks after the account opened (she hadn't done anything with the money yet) and said that someone was using her debit card in Mexico! Well, luckily they had stopped the account because of the suspected fraud. They were very good, and credited all her money back to her once they got all the records straight. But she did have them cancel the debit card and send her a straight atm card with pin. She was very lucky that this wasn't her regular checking account. I'm very leery now of debit cards and those credit-card look alikes. My sister also had a problem with the same kind of thing, although to a lesser extent. I'm sticking with my usual sop (I write checks).

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Author: BEL Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2721 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/25/1998 11:01 AM
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In my effort to get out of debt, I now have no credit cards and use my Visa/Debit card issued by my bank. It offers a convenient way to track spending, prevent impulse spending because of the "spectre" of available funds, and won't let you go anywhere near credit debt. The only account/person you're spending against is yourself--and you can even set up a way to pay yourself back, if you're dedicated and diligent enough.
No monthly bills--just statements.

The debit card has been one of my best friends in my ongoing battle with debt (which I am winning, ever so gradually).

Granted, there are certain unsavory risks that sometimes loom, but you'll face those same risks with credit cards--sometimes worse if you're a spendthrift.

Maybe someday, consumer debt in America will eventually reach a point that will *require* even greater use of debit cards as a means of instituting responsible domestic consumer spending. Perhaps the government should be required to use a debit card! :)

my 2 cents
BEL

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Author: KoshN Three stars, 500 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2733 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/25/1998 5:06 PM
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<< 3. Cuts down on impulse spending (IMHO), by alleviating the need to carry cash around. They are accepted where ever a VISA or MASTERCARD are accepted, and I use mine extensively on business trips, as it provides a convenient way to make purchases wherever you are, and makes it EXTREMELY easy to track your spending, as you have all purchases listed on your bank statement each month. >>

Some banks will do that with checks also, but then you don't get the next advantage...
4. You can't bounce a check if you don't use one.


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Author: FreeCashFlow Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2735 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/25/1998 7:32 PM
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<<So, as you stated, debit cards do have their place right alongside a credit card. I have one of each, and they complement each other quite nicely.>>

If you have a credit card, why would you need a debit card? Just charge on the credit card what you would have used the debit card for, and pay your bill in full and on time.

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Author: FreeCashFlow Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2736 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/25/1998 7:38 PM
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<<The part I disagree with is where you state what happenes with fraud. The likeliness of fruad in either situation, either a CC or a Debit card to me is equal. Granted the effects are different but both can be equally bad and just as frustrating to resolve. >>
True, but any expert in negotiation would tell you that in a credit card dispute, you negotiate from a position of strength, because YOU hold the money until you pay it. In a debit card dispute, your financial institution is holding the money until the dispute is resolved. In this case, you are negotiating from a position of weakness.

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Author: FreeCashFlow Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2737 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/25/1998 7:39 PM
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<<I have a story related exactly to this. My mom set up one of those cash-management accounts with USAA (some pretty big bucks), and they had sent her a debit card. She thought it was a regular atm card. Well, USAA called here just a few weeks after the account opened (she hadn't done anything with the money yet) and said that someone was using her debit card in Mexico!>>

This is why I don't like the concept of debit cards or ATM cards tied to a brokerage account. If there is a snafu, there is a lot of money at stake.

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Author: TMF2Aruba Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2738 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/25/1998 7:47 PM
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<<I don't understand the boom in debit cards, which automatically deduct money from your bank or brokerage account each time you use the card. True, you don't have to worry about paying them, but if you have the money, is it really that hard to write a check and send off your payment each month?>>

Freecashflow,

You make some good points, but there really is no difference as far as fraud. If someone were to get a hold of the card, you're liable only for the first $50, and that's only if you don't report it within a certain amount of time.

I do agree with you about the disputing of charges. I would only use a credit card for hotels and car rentals.

However, I gotta tell you, I love my debit card. It costs me nothing, repeat--nothing-- to use it, and there are times when I don't want to charge things. While I always pay my balance in full, I don't charge everything, as I don't like to let it get out of control. So, there are times when I want to use money from my checking account, and the debit card works beautifully.

Is it hard to write a check? No, but I hate doing it if I don't have to. They're often a pain, as they sometimes have to get "approval" from a manager, I hate that. I don't like having to stand there and write it out. I don't like having to worry about remembering to take a check with me (I don't carry my checkbook). Overall, it's a nuisance.

By using my debit card for purchases, I just hand over the card to a merchant who for all intent and purpose thinks it's a credit card--mine has the Mastercard logo on it. I just put the receipt in my wallet, and enter the amount in the checkbook later on. Even if I forget to do that, it's no biggie, as it comes up the next day on my online banking.

Sure, there are many many times when I select to use my credit card and earn those miles, but very often, I prefer to use cash, and in those cases I love using my debit card.

Tony
...but I still am...

Off2Aruba

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Author: TMF2Aruba Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2742 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/25/1998 8:14 PM
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<<True, but any expert in negotiation would tell you that in a credit card dispute, you negotiate from a position of strength, because YOU hold the money until you pay it. In a debit card dispute, your financial institution is holding the money until the dispute is resolved. In this case, you are negotiating from a position of weakness.>>

No argument there, but to be honest, I don't use debit cards where there would be a situation for a dispute. I use it for purchases, not services where there's a chance of not receiving what I paid for.

Examples:
Debit card: Food, CD's, pool supplies
Credit card: Big ticket items, travel related stuff, services rendered.

Don't misunderstand, I'm not saying that a debit card is for everything. Neither is a credit card. Using either with common sense can prove them both to be very good tools.

Tony
...but I still am...

Off2Aruba

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Author: TMFRunkle Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2745 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/25/1998 9:34 PM
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<<Furthermore, if there is fraud, a glitch, or another snafu involving your debit card, this can trigger a chain reaction of other problems at your bank or brokerage account, such as falling below the minimum balance and bounced checks. If the snafu involves a credit card instead, at least you can dispute it and be off the hook during the dispute. In the event of fraud, your liability is limited to $50. On the other hand, debit cards don't have such limited liability protection.>>

I suggest you check with your bank on this. My bank (Mellon) has a limit on liability of $50 on my debit card. PNC also extends the same protection.

There are some advantages to a debit card. I use mine when buying gasoline (I don't have to carry all that cash), or when making purchases that I would normally use cash or a check on, such as the grocery store. It saves carrying $100 plus dollars in cash to the grocery store, and is much easier and convenient than a check.

I would never use a debit card for something that could be disputed later, like a major purchase. However, it is quite a convenience for other items.
George

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Author: TMFRunkle Big gold star, 5000 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2746 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/25/1998 9:43 PM
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Let me add to the Debit vs. Credit Card. I was nervouse about using my credit card for big purchases, since I was afraid I might not pay the whole bill when due and I'd be back on the hassle with the credit balance again. If you have electronic banking like with Quicken, you can treat your credit card like a debit card.

All I did was make the purchase, and when I got home I paid the exact amount electronically from my checking account to my credit card. The best thing about this was I scheduled it for my pay day, which helps my cash flow.
George

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Author: CMHPeteM One star, 50 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2754 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/26/1998 2:42 AM
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FreeCashFlow,

Personally, I'm with you. I received a debit card from my credit union and after reviewing the pros and cons, couldn't see why I would want to use it. It sits in my desk.

However, after reading this board for the past few months, I can see how others would prefer a debit card to a credit card. I think it really comes down to a matter of personal style; how comfortable we are with the various ways of managing our money.

My 2 cents,
Pete

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Author: Wannabechef One star, 50 posts Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2755 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/26/1998 5:46 AM
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Most of what you're saying is true but...
for many, writing checks means waiting for the payment to be posted or lost in the mail. CC are more likely to lead to spendaholica. Debit cards , to me are a final purchase so I agree with reservation, trips should be on a cc for dispute purposes, only. To tie in a debit card to a brokerage account is crazy in my opinion.

As one who paid off a $30,000 debt in a year working 2 full-time jobs, believe me, debit cards have their place. It only takes a very materialistic spouse toput you in big-time debt where the un-guilty party is also liable.

Debit cards are great for routine purchases like grocery shopping, spending money for routine items usually risk-free or low risk for returns.

I usually pay ahead to Discover Card and use that as a debit card, a lot. Cash back a year later and less problems. My debit card is good for everyday shopping when I need it. The cash is waiting there for me to use.

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Author: PSUEngineerFool Big funky green star, 20000 posts Top Favorite Fools Top Recommended Fools Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2765 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/26/1998 1:14 PM
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Tony (TMF2Aruba) says:

You make some good points, but there really is no difference as far as fraud. If someone were to get a hold of the card, you're liable only for the first $50, and that's only if you don't report it within a certain amount of time.


Actually, this is not currently a true statement in terms of actual law. Mastercard and Visa are voluntarily limiting liability to $50.


Quoting from the Federal Trade Commission:

If your credit card is lost or stolen, you can't lose more than $50. If someone uses your ATM or EFT card without your permission, you can lose much more.

If you report an ATM or EFT card missing before it is used without your permission, the EFT Act says the card issuer cannot hold you responsible for any unauthorized withdrawals. If unauthorized use occurs before you report it, the amount you can be held responsible for depends upon how quickly you report the loss to the card issuer. If you report the loss within two business days after you realize your card is missing, you will not be responsible for more than $50 for unauthorized use.

However, if you do not report the loss within two business days after you realize the card is missing, but you do report its loss within 60 days after your statement is mailed to you, you could lose as much as $500 because of an unauthorized withdrawal. And, if you do not report an unauthorized transfer or withdrawal within 60 days after your statement is mailed to you, you risk unlimited loss. That means you could lose all the money in your account and the unused portion of your maximum line of credit established for overdrafts.

The link for this information is http://www.ftc.gov/WWW/bcp/conline/pubs/credit/elbank.htm

Currently, several Legislators are trying to amend the Electronic Funds Transfer Act to limit liability to $50 for debit cards.

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Author: TMF2Aruba Big funky green star, 20000 posts Old School Fool CAPS All Star Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2769 of 308365
Subject: Re: Debit cards: What's the point? Date: 6/26/1998 2:12 PM
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<<Quoting from the Federal Trade Commission:....>>

PSUEngineeringFool,

Thanks for posting that. It's an important point that everyone should know. Hopefully those rules will be amended soon to make sure protections for debit cards are equal to credit cards in all respects.

I always make sure my ATM card is in my wallet, so I'm not worried about it getting in the wrong hands. If it were to be missing, I'd report it right away, and be protected.

If someone were to be able to get hold of my number, and use the card that way, I wouldn't know about it within 2 days, but that rule doesn't apply, as it's out of one's control in that instance.

Tony
...but I still am...

Off2Aruba

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Author: TMFJedi Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2965 of 308365
Subject: Re: Debit cards: What's the point? Date: 7/1/1998 5:02 PM
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<<1. NOT having to write a check. I hate writing checks, and even worse, having to paste 32 cents
postage on an envelope, so it can take 4 or 5 days for it to get to the payee. >>

BIG plus -- I get charged if I write more than 5 checks/month, which I usually do just to pay the bills. So a debit card is GREAT here. That and I hate to carry a checkbook, so if I don't have cash on me (I rarely do) then debit card is the way to go.

Kaiti
Jedi in orbit

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Author: emtwo Big gold star, 5000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: 2966 of 308365
Subject: Re: Debit cards: What's the point? Date: 7/1/1998 6:13 PM
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BTW Kaiti......Welcome Back!!!!

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