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Debit Cards 101

By Melissa Cassar

Fifteen years ago, only a few million Canadians carried debit cards. Today, more than 80 percent of us use them to withdraw cash, pay bills and make purchases at stores, restaurants and other merchants worldwide.

Not only are debit cards safer than carrying cash and more convenient than writing cheques, they often offer better fraud and theft protection than either. But, like their credit card cousins, debit cards require careful oversight to ensure you don't overextend yourself – or risk security lapses.

How they work: Debit cards work similarly to cheques, with transactions deducted directly from your chequing account. You can use them to:

• Buy goods and services either in person, on the Internet or by phone, reducing the need to carry cash or a chequebook
• Make one-time or recurring bill payments – reducing postage and eliminating worries about missed payments
• Withdraw money from ATMs

You can complete debit card transactions several different ways: place an order online, by phone or mail; enter a personal identification number (PIN); or simply wave your card at select merchants if your debit card has a Visa payWave capability (if you are not sure, look for the payWave symbol on your card or contact your bank).

Balancing and fees. Unlike credit cards, where the bank essentially loans you money until next month's statement, with debit cards the money is withdrawn directly from your account. Many people like using debit cards so they're not tempted to spend money they don't have.

However, with debit cards, if your account doesn't contain sufficient funds, the bank will either prevent the transaction (like bouncing a cheque) or cover the shortfall and charge you an overdraft fee. Overdrafts are costly – up to $35 per item – so to keep them in check:

• Verify your account balance daily, online or by phone, tracking which deposits, cheques and card transactions have cleared.
• Enroll in online banking in case you need to transfer funds electronically.
• Keep a cushion in your account in case deposits and withdrawals cross.
• Record all transactions in your cheque register immediately. Don't forget about fees for using ATMs outside your bank's network.
• When your monthly statement arrives, carefully balance it against your register to prevent mistakes that could trigger fees.

Security measures. It's important to check your monthly statements and online balances often and promptly report any unauthorized activities. If your card is lost or stolen, contact your financial institution immediately. This can reduce your liability if fraud losses occur.

A few additional safety precautions:

• Always take sales receipts and carbon copies and store them in case you need to reference them later.
• Review your statements carefully. If you suspect a mistake, call your financial institution immediately – and always follow up with a confirmation letter.
• Report lost cards or unfamiliar transactions immediately. This reduces your liability if fraud losses occur.
• Choose and memorize a unique PIN and keep it private. Avoid obvious choices such as your address, phone number or birth date.
• Avoid using unbranded or damaged – looking ATMs.

Debit cards can be a safe, easy payment alternative. Just be sure you take the same level of security precautions you would with cash, cheques or credit cards

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