University of Illinois Extension

Purchase with a Debit Card

Financial institutions, such as banks or credit unions, issue debit cards. A debit card is a plastic check that allows you to purchase products without paper checks, cash, or credit cards. Debit cards can be ATM cards or check cards. Even though debit cards may have a MasterCard or Visa logo on them, they are not credit cards. When you use a debit card, money is taken directly from your bank account.

To receive a debit card, you will fill out paperwork to request the card. You may also have to meet the financial institution's requirements such as satisfactory credit history, an account open for a certain period of time, or in good financial standing.

When you get a debit card, you will be issued a Personal Identification Number (PIN). The PIN is specific to your card and allows only you to transact business on your account. You must have a checking or savings account to be issued a debit card. The amount you can spend depends on the amount of money you have in your account.

Online vs. Offline Debit Cards

You may be familiar with ATM cards. An ATM card can be used at an Automated Teller Machine (ATM) or cash machine. With an ATM card, you can withdraw money from your bank account, make deposits, transfer funds, and check account balances.

Online debit cards are usually enhanced ATM cards. When you use an online debit, the funds are deducted from your account immediately or on the same business day.

An enhanced ATM card can also be used online at a point of sale merchant (POS). Instead of writing a check, you use your card. For the transaction to debit your account, you must enter your card PIN. A POS transaction will check that you have enough money in your account to pay for the purchase.

Offline debit cards are referred to as check cards. An offline debit means funds are not immediately deducted from your account. The transaction works much like writing a check. When making a purchase, you sign a receipt, and the funds are deducted in one to three business days from your checking account.

Check cards are often associated with a credit card issuer such as VISA or MasterCard. This allows the card to be accepted anywhere the credit card is accepted. The debit card will look like a credit card; however, the money will be withdrawn from your checking account when you use it.

Some issuers combine ATM and offline cards (check cards). If you choose "debit" at a merchant's payment station, the transaction will be done on-line requiring your PIN. The money will be withdrawn from your account immediately. If you choose "credit" the transaction will be done offline, requiring your signature.

A Lost or Stolen Debit Card and Your Liability

If your debit card is lost or stolen, or if you suspect someone has used it, report it to your financial institution immediately. The sooner you report it, the less money you are liable to lose.

According to the Electronic Fund Transfer Act:

  1. If you make a report within two business days, you're liable for no more than $50 per card.
  2. If you report it within 60 days, after you receive your bank statement, your liability increases to a maximum of $500.
  3. After 60 days, if you don't report your loss, you could lose all the money in your account.

Keep records of all of your transactions. This will help the financial institution research your situation.

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