With no fees for transactions, no debt added to high-interest credit cards, “zero liability” fraud protection and new rewards programs, the debit card (a.k.a. the check card) is proving to be a grand slam for consumers.

Convenience and Security

According to the Federal Reserve, debit cards, which draw money directly from your checking account, have been used to make more purchases than credit cards since 2003.

The popularity is attributable to improved money management, convenience and security. With the high interest rates and late fees charged by the credit card companies, consumers see debit cards as a way to budget their money more effectively. For example, one doesn’t have to carry cash or have exact change any longer, and because all transactions are on your bank statement, it simplifies your record keeping.

Rewards Still Count

Though not as robust as credit card rewards, debit card reward programs are still good enough for those who use debit as an alternative to credit cards, cash or checks. With most debit cards, however, points are earned only on signature purchases and aren’t earned on all transactions, including ATM withdrawals, balance transfers or payments made to prepaid or reloadable cards.

The rewards and point systems vary from bank to bank. So as always, do your homework and compare one bank’s card to another – choosing the best solution to meet your personal needs.

Equal Protection

Another feature that has been added to debit cards is fraud and loss protection. Most debit cards now have the same fraud and loss protections as credit cards. The Fair Credit Billing Act and the Electronic Funds Transfer Act (both acts can be found under DMB’s Helpful Links page on the web) provide procedures for consumers to follow if a credit or debit card is lost or stolen.

The Electronic Funds act, which covers debit cards, states that your liability is dependent upon how quickly you report the loss or theft. For example, if you report the theft within two business days, you are liable for only $50 in unauthorized use. If you don’t report the loss in two business days, according to the Federal Trade Commission, you could lose up to $500 because of an unauthorized transfer. You also risk unlimited loss if you fail to report an unauthorized transfer within 60 days after your bank statement containing the unauthorized use is mailed to you. Moreover, take note that it may take time to restore the funds in question into your account.

The Future of Debt Cards

While debit cards offer much in the way of convenience and protection against fraud and loss, they don’t appeal to everyone. Consumers who always pay their credit card balances in full will find that a rebate credit card is far more attractive than a debit card due to the higher rewards and additional float time on their money.

Nevertheless, it is anticipated that the use of debit cards will continue to proliferate as consumers find them effective in managing their money while avoiding the pitfalls that credit cards present.

Related Posts:

1. 8 Tips for Using Debit (Check) Cards
2. Your Five Minute Guide to Banking
3. Why Do Credit Cards Expire?
4. Keeping Your Credit Cards at Arm’s Length
5. Protecting Yourself Against Fraud