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Financial institutions (banks and credit unions) typically offer debit cards when you open a checking account. A debit card allows you to pay using money that is already in your checking account. Debit cards are often useful for small, routine purchases, but they generally offer fewer protections than credit cards for major purchases or online transactions, particularly when disputes or unauthorized charges occur.
What happens when I don’t have enough money in my checking account?
If your checking account does not have enough funds, your debit card transaction may be declined. Some banks and credit unions offer overdraft protection, which may allow debit card transactions to go through even when your balance is insufficient. However, overdraft protection usually involves an overdraft fee. Check with your financial institution for details.
What fees may apply when using a debit card?
Annual Fee: Debit cards typically do not have an annual fee. However, because debit cards are linked to checking accounts, other fees, such as account maintenance fees, may apply. Check with your financial institution for details.
Convenience Fee: A convenience fee is a charge passed on to customers to cover the cost of using an alternative payment method that is not standard for a business. Convenience fees are allowed in all 50 states.
Businesses that traditionally accept cash or check but allow payment by debit or credit card for convenience may charge an additional fee for that convenience. For example, a doctor’s office may typically accept payments in person. However, if the doctor’s office offers customers the option to pay by phone, it may charge an additional fee.
- You can be charged a convenience fee to pay with your debit card.
- Avoid convenience fees by using standard payment methods like cash pr automated clearinghouse (ACH).
- Convenience fees are a set amount and not a percentage of the transaction. These fees must be posted publicly.
- If you paid with a debit card and were charged a fee determined by the percentage of the sale, it was likely a mistake. You can contact the merchant or your financial institution to initiate a dispute.
Overdraft Fee: If you opt in to overdraft protection for your debit card, your financial institution may allow your purchases to exceed your available balance, but an overdraft fee will apply.
You must opt in to overdraft protection for one-time debit card purchases. If you do not opt in, transactions that exceed your balance will generally be declined without a fee. However, overdrafts caused by automatic bill payments or other preauthorized transactions may still result in overdraft fees. Check with your financial institution for details.
Tips for making purchases
- Avoid spending more than you have in your checking account. Overdraft fees can be very costly.
- Consider using cash for small purchases. While a debit card can be convenient, the imposition of an overdraft fee can significantly increase the cost of everyday items.
- If you have a credit card, consider using that instead. Credit cards often provide great protections and may allow you to avoid interest charges if the balance is paid in full by the due date.
Keep your debit card information safe
- Never share your personal identification number (PIN) over the phone.
- Do not carry your PIN in your wallet or write it on your debit card.
- Review transactions carefully before entering your PIN or signing a receipt.
- Monitor your checking account regularly and report unauthorized transactions to your financial institution immediately.
Consumer tips to avoid fees
- Understand your payment options.
- Choose payment methods that do not include additional fees whenever possible.
- Consider paying in cash. Some merchants offer a discount when using cash.
- Ask about payment fees before completing the transaction.
- Review online purchases before clicking to submit payment,.
- Look for posted notices about fees at in-store checkout areas, like the cash register.
What is card blocking?
In some debit transactions, consumers may find more money initially charged against their accounts than they expected. This is a legal business practice called “blocking,” but it is still important for consumers to be aware of this to avoid overdrawing bank accounts.
Blocking most often occurs when you check into a hotel, rent a car or pump gas. Even though your hotel stay or rental contract is just beginning, your debit card company will often block off the entire estimated total, and sometimes more, from your account when your card is initially swiped. For instance, if you are spending three nights at a hotel that charges $100 a night, at least $300 will likely be blocked on your account when you check-in. The actual amount may be raised even higher to include possible incidental charges. If your account balance is low, this can cause problems.
Before using your card, ask the amount that will be blocked, what determines that amount and how long the block will remain on your card. If the block would cause an overdraft or reduce your account balance so as to risk future overdrafts, consider using another form of payment.
What is card skimming?
Skimming refers to the method by which information is stolen from an account access device, such as a credit card, debit card or ATM card. Typically card skimming occurs through the use of a handheld electronic swiping device; however, more sophisticated criminals have been able to manufacture skimming components that imitate legitimate card-reading devices like those found on ATMs and fuel pumps.
Although you may not be able to prevent crime from happening, there are ways to protect yourself from this type of fraud:
- If at all possible, do not let your credit or debit card out of your sight.
- Take notice of your surroundings. If an ATM or fuel pump looks as if it is been tampered with, do not use it and notify the owner or management.
- Always review your account statements for any suspicious activity.
- If you detect an unauthorized charge, notify your financial institution as soon as possible. Timely reporting of an unauthorized charge will mitigate your liability.