How widespread are debit cards in the US?

[Evo]

I am confused about the 'debit or credit" selection on my debit card, both transactions are debited equally from my checking account without any fees. Some merchants prefer that I select "credit", where I sign the receipt, others are fine with "debit" where I simply enter my pin. There is no difference to me. There are no fees for either. Perhaps this varies from bank to bank?

 

[phinds]

I am confused about the 'debit or credit" selection on my debit card, both transactions are debited equally from my checking account without any fees. Some merchants prefer that I select "credit", where I sign the receipt, others are fine with "debit" where I simply enter my pin. There is no difference to me. There are no fees for either. Perhaps this varies from bank to bank?

Hm ... that's quite different than what I experience. My credit cards are not it any way tied to my bank account. I have to write a check to the credit card company every month. Debit cards are, as you experience, debited to a bank account immediately.

 

[Evo]

Hm ... that's quite different than what I experience. My credit cards are not it any way tied to my bank account. I have to write a check to the credit card company every month. Debit cards are, as you experience, debited to a bank account immediately.

Well, I have "credit cards" that are not tied to my bank, I have to pay them separately and they have monthly finance charges. But the debit card tied to my checking account can be run through as either credit or debit, but there is no finance charge and the money is immediately debited from my checking account regardless of which way it is run. I don't understand if there is supposed to be some difference, I don't see it.

 

[phinds]

Well, I have "credit cards" that are not tied to my bank, I have to pay them separately and they have monthly finance charges. But the debit card tied to my checking account can be run through as either credit or debit, but there is no finance charge and the money is immediately debited from my checking account regardless of which way it is run. I don't understand if there is supposed to be some difference, I don't see it.

Ah. Gotcha. I have a debit card that I use in my bank's ATM for cash withdrawals and it has the option to also be a credit card but I asked that that feature be defeated so have never used it that way and don't know if it would act they way yours does. No reason to think it wouldn't thought. I also don't use it as a debit card at stores, but I assume it functions as any debit card would.

 

[russ_watters]

Here's a good article discussing the difference:

Debit and credit transactions are processed differently: Here’s how MasterCard explained it in an emailed statement to Credit.com: When you use a debit card and your PIN (personal identification number), the transaction is completed in real time, also known as an online transaction — you authorize the purchase with your PIN and the money is immediately transferred from your bank account to the merchant. With a http://www.credit.com/credit-cards/content/how-do-credit-cards-work/, or using a debit card as credit, it’s an offline transaction.

“The funds for offline transactions are deducted after the merchant settles the purchase with the credit card processor and typically take 2-3 days to be reflected in your account balance,” MasterCard says.

http://blog.credit.com/2015/01/what-happens-if-i-swipe-my-debit-card-as-a-credit-106688/

In terms of deciding what to pick, i think the retailer would prefer you select "debit" because it is cheaper for them and they get their money faster. If you have a debit card it probably doesn't matter much to you, but your bank may offer different terms depending on the transaction type. So you should check to make sure you are getting your cash back bonus or whatever.

If using a credit card, it is easy: never, ever make a "debit" transaction unless you need it to get physical cash because there is usually a fee and interest starts right away.

 

[NascentOxygen]

Looking at my checking account, I can tell the difference between the two:
-Transactions that were rung-up as "credit" transactions say "Debit Card Purchase" and take 1-3 days to withdraw the money from my account.

So on your credit purchases you're getting no more than 3 days of credit before the loan is repaid? Most credit cards allow up to 30 or so days before you have to repay the loan, with or without interest.

Usually people hold a VISA debit card for one reason only: because their bank will not provide them a VISA credit card, and this is because under the criteria of income and assets they are judged to be credit risks. Unlike ATM cards, the VISA debit card can be used internationally and is accepted by most of the merchants who already accept VISA credit cards. Unlike ATM debit cards, the VISA debit card offers the cardholder protection against faulty purchases, etc.

The holder of a pure debit VISA debit card doesn't face the question of whether the purchase should be as debit or as credit, simply because the bank won't provide them a line of credit.

 

[Evo]

Usually people hold a VISA debit card for one reason only: because their bank will not provide them a VISA credit card, and this is because under the criteria of income and assets they are judged to be credit risks.

Here your bank gives you a debit card and people use it instead of carrying cash, I consider it the same as cash, and I no longer have to write checks, but using it does not reflect on your credit report, so I also have a few credit cards to use to build up my credit rating and also take advantage of perks that they offer.

The holder of a pure debit VISA debit card doesn't face the question of whether the purchase should be as debit or as credit, simply because the bank won't provide them a line of credit.

Is this like a pre-paid card where you deposit money into the credit card account to then use it like a credit card, but it's actually drawing from your money that you deposited, they are not extending you credit?

 

[vela]

So on your credit purchases you're getting no more than 3 days of credit before the loan is repaid? Most credit cards allow up to 30 or so days before you have to repay the loan, with or without interest.

There are two types of credit cards. The traditional one is linked to a line of credit, which is the one that gives you about a month before you have to repay it if you want to avoid interest charges. There are also combination credit/debit cards linked to bank accounts. These aren't really credit cards because the money gets pulled from your bank account within a few days. Retailers prefer you use the card as a debit card because it's cheaper for them, while the bank would prefer you use it as a credit card because they make more money that way.

I don't really see the advantage of having a "credit" card tied to a bank account. It just seems like a convenient way for a crook to drain your bank account if they happen to find a card you lost.

 

[NascentOxygen]

Is this like a pre-paid card where you deposit money into the credit card account to then use it like a credit card, but it's actually drawing from your money that you deposited, they are not extending you credit?

Yes, it's impossible to "overdraw" on a debit card because it draws on only those funds you already have in your linked account, and the POS computer consults your bank before each transaction is accepted. I think there are no fees or charges associated with purchases made using the personal debit card issued by your bank.

If you use a prepaid credit card from a store I think you'll find there are various fees and charges associated with each purchase made using it. The advantage it offers is that it has no connection with your bank account, so criminal misuse cannot cause havoc by draining your savings.

 

[jtbell]

Yes, it's impossible to "overdraw" on a debit card because it draws on only those funds you already have in your linked account

In the US, many or most banks offer "overdraft protection" which borrows from the bank temporarily if your account doesn't have enough funds to cover a transaction (check/cheque or debit card). There is a stiff fee which averages about $35 per transaction. Banks apparently make a lot of money from these fees.

Consumers are still getting hit with huge overdraft fees (CNN, 2015)

 

[russ_watters]

Usually people hold a VISA debit card for one reason only: because their bank will not provide them a VISA credit card...

Well...I have a Visa debit card from my bank mostly because my bank doesn't issue single purpose ATM cards anymore. And the convenience/flexibility thing:

Unlike ATM cards, the VISA debit card can be used internationally and is accepted by most of the merchants who already accept VISA credit cards. Unlike ATM debit cards, the VISA debit card offers the cardholder protection against faulty purchases, etc.

I'm not sure about the fraud protection (my bank has it, but I'm not sure it is inherent in debit cards), but yes, the other nice thing is that unless you want to, you only really need one card. Though these days, the only common type of purchase I can think of that only does "credit" type purchases and not "debit" type purchases is restaurants.

The holder of a pure debit VISA debit card doesn't face the question of whether the purchase should be as debit or as credit, simply because the bank won't provide them a line of credit.

Again: the way you worded that is confusing and implies something that isn't true. I think you mean that regardless of what you pick, the money gets debited from your account. Sure: that's determined by the account type. But "face the question" implies the transaction terminal won't ask. That isn't true: It doesn't matter which card you have, at the point of sale, the terminal will ask you if you want to make the transaction as a "debit" transaction or "credit" transaction.

 

[russ_watters]

In the US, many or most banks offer "overdraft protection" which borrows from the bank temporarily if your account doesn't have enough funds to cover a transaction (check/cheque or debit card).

Just to add some complexity, I think it depends on the type of transaction. My checking account is linked to my credit card for overdraft. So if I write a check or have an automatic withdrawal that overdrafts the checking account, I get a cash advance from the credit card. But I don't think it will do that if I try to do an ATM withdrawal; I think it will reject it.

There is a stiff fee which averages about $35 per transaction. Banks apparently make a lot of money from these fees.

Some credit unions won't charge fees, which is nice.

 

[NascentOxygen]

Again: the way you worded that is confusing and implies something that isn't true. I think you mean that regardless of what you pick, the money gets debited from your account. Sure: that's determined by the account type. But "face the question" implies the transaction terminal won't ask. That isn't true: It doesn't matter which card you have, at the point of sale, the terminal will ask you if you want to make the transaction as a "debit" transaction or "credit" transaction.

It's a redundant button press. For a single-purpose card it is immaterial which is pressed. (Though it is a long time since I deliberately pressed the wrong one just to prove this.)

I'm not sure about the fraud protection (my bank has it, but I'm not sure it is inherent in debit cards),

By protection I meant consumer rights. If you discover your purchase is defective and the seller refuses to refund or replace, then if you purchased with a bank brand EFTPOS card it is as though you paid with cash. (Bad luck). But if you purchased using a VISA debit card (funds still taken directly from your savings account), then VISA can flex its muscle and retrieve your money for you from the recalcitrant seller. (The same protection as holds for purchases using VISA's credit card.)

 

[Kevin McHugh]

I don't know if there is a language barrier here, but in the US a "debit card" and a "credit card" are the same physical card. They only differ slightly in their financial linkages and indeed the same card can often be used in either mode. We can discuss the intricacies of each or...

If you are just asking whether people use cash or cards, it is personal preference, but I tend to use cash only for small purchases and cards for everything else.

Russ, there are protection issues at hand. Thieves are reading readers at gas pumps. If you've used a credit card, you're covered for any fraud. If it was your debit card, you're in for a fight with your bank. Maybe things have gotten better, but in the past, debit card holders were on the hook.

 

[NascentOxygen]

I don't know if there is a language barrier here, but in the US a "debit card" and a "credit card" are the same physical card. They only differ slightly in their financial linkages and indeed the same card can often be used in either mode.

The difference between my Australian cards is that the pure debit card displays underneath "VISA" in barely discernible print "DEBIT CARD", whereas the credit card just shows "VISA".

As far as the user is concerned, the only difference I run into is that at the supermarket I can pay for groceries and receive a handful of cash if I use the debit card, but cash out is not available if I pay using credit. The only way to get cash if all you have is a credit card is to go to any bank and ask for a "Cash Advance", and the interest rate is high.

I assume there still exist combo credit-debit cards like the one I used to have. Maybe people find it easier to manage their finances when they have separate cards? I limit my debit card's exposure by using it nowhere except in supermarket machines when I need cash and in ATMs, because fraudulent use of its details could empty my credit union account in an instant.

 

[Evo]

The difference between my Australian cards is that the pure debit card displays underneath "VISA" in barely discernible print "DEBIT CARD", whereas the credit card just shows "VISA".

As far as the user is concerned, the only difference I run into is that at the supermarket I can pay for groceries and receive a handful of cash if I use the debit card, but cash out is not available if I pay using credit. The only way to get cash if all you have is a credit card is to go to any bank and ask for a "Cash Advance", and the interest rate is high.

I assume there still exist combo credit-debit cards like the one I used to have. Maybe people find it easier to manage their finances when they have separate cards? I limit my debit card's exposure by using it nowhere except in supermarket machines when I need cash and in ATMs, because fraudulent use of its details could empty my credit union account in an instant.

I think there are some differences between cards in the US and in other countries.

Last week I was looking over my card accounts and I noticed that my Discover card had a slightly higher APR than my other cards, although the balance on the card is zero. I called and asked if the rate would ever decrease, or if I should just close the account, and maybe reapply for a lower rate in a year or two. They said no, they would give me the next 12 months at ZERO APR, and then I could call and negotiate rates after the free 12 months, would that be ok? Uhm, HELL YEAH. Of course, I probably won't be charging anything and carrying a balance, but just in case, it's nice to have. I wonder if I should call my other cards? Oh, and I get cash back rewards for using my card even though it doesn't cost me anything. There is no annual fee, I would NEVER pay an annual fee.

Oh, and I've only had the Discover card for a year, so it's not like I've been a treasured long time customer.

 

[Pepper Mint]

...

As far as the user is concerned, the only difference I run into is that at the supermarket I can pay for groceries and receive a handful of cash if I use the debit card, but cash out is not available if I pay using credit. The only way to get cash if all you have is a credit card is to go to any bank and ask for a "Cash Advance", and the interest rate is high.
...

That is good to hear. But how do the cashiers charge your purchased items ? (using your debit card)

 

[NascentOxygen]

That is good to hear. But how do the cashiers charge your purchased items ? (using your debit card)

Purchases and cash out are paid by real time direct debit from the savings account to which the VISA debit card is linked.

 

[Pepper Mint]

Purchases and cash out are paid by real time direct debit from the savings account to which the VISA debit card is linked.

OK, I thought if your purchases were $100.33 for example then you would get back 67 cents (real "coins" real cash) as your payment were rounded up to $101, which was odd to me when you paid them with your card.

 

[NascentOxygen]

OK, I thought if your purchases were $100.33 for example then you would get back 67 cents (real "coins" real cash) as your payment were rounded up to $101, which was odd to me when you paid them with your card.

Cash out saves you going to the bank or to a bank's ATM. You say to the supermarket cashier "I'd like to buy this basket of groceries ($100.33) and I'd like $200 in cash, please", so $300.33 is debited from your bank savings account, you depart carrying groceries and $200 cash, and the transaction costs you no extra in supermarket or bank fees/interest.

 

[Evo]

Cash out saves you going to the bank or to a bank's ATM. You say to the supermarket cashier "I'd like to buy this basket of groceries ($100.33) and I'd like $200 in cash, please", so $300.33 is debited from your bank savings account, you depart carrying groceries and $200 cash, and the transaction costs you no extra in supermarket or bank fees/interest.

Can you only tie the debit card to savings? Here they are tied to checking.

 

[NascentOxygen]

Can you only tie the debit card to savings? Here they are tied to checking.

I don't know, for the simple reason that almost no one here uses a personal cheque account now. Bank fees and charges, inherent processing delays, and rising postage costs have seen personal cheque accounts go the way of the dodo. All bill paying can be done online (or at least over the phone by providing your credit card number) and mostly without fees and charges. Businesses still use a few cheques, as do old people who never learned to use computers.

 

[Evo]

I don't know, for the simple reason that almost no one here uses a personal cheque account now. Bank fees and charges, inherent processing delays, and rising postage costs have seen personal cheque accounts go the way of the dodo. All bill paying can be done online, and mostly without fees and charges. Businesses still use a few cheques, as do old people who never learned to use computers.

Yes, checking accounts have changed to be electronic, and used with debit cards. I haven't used a paper check in a few years.

 

[russ_watters]

I still use physical checks for a couple of bills that the company has no or crappy online paying systems. But I have a credit union and there are no fees.

Some may find interesting the different protections for the different types of transactions for my debit card:

Liability for Unauthorized Card used with PIN Transactions. Tell us AT ONCE if you believe your Card and PIN have been lost or stolen. Telephoning is the best way of reducing your possible losses. You could lose all the money in your account (plus your maximum overdraft line of credit). If you tell us within 2 business days, you can lose no more than $50 if someone used your Card with PIN without your permission. If you do NOT tell us within 2 business days after you learn of the loss or theft of your Card and PIN and we can prove we could have stopped someone from using your Card with PIN without your permission if you had told us, you could lose as much as $500. Also, if your statement shows transfers that you did not make, tell us at once. If you do not tell us within 60 days after the statement was mailed to you, you may not get back any money you lost after the 60 days if we can prove that we could have stopped someone from taking the money if you had told us in time. The following conditions are excluded from the above coverage: (1) use of the Card for which you receive a benefit and (2) use of the Card by a person with actual, implied, or apparent authority.

Liability for Unauthorized Card used without PIN Transactions. You will be liable for the amount of unauthorized Transactions made with your Card without use of a PIN as follows: Your liability for unauthorized use of your Card will not exceed: (1) $0 if: (a) you reported the loss or theft of your Card within a reasonable time of discovery of such loss or theft; (b) you exercised reasonable care in safeguarding your card from risk of loss or theft; (c) you have not reported two or more incidents of unauthorized use to the Bank in the immediately preceding twelve-month period; and (d) the account to which transactions initiated with your card were posted is in good standing, or (2) the lesser of $50 or the amount of money, property, labor, or services obtained by the unauthorized user before notification to Bank if the conditions above have not been met. Also, if your statement shows transfers that you did not make, tell us at once. If you do not tell us within 60 days after the statement was mailed to you, you may not get back any money you lost after the 60 days if we can prove that we could have stopped someone from taking the money if you had told us on time.