Becoming Knowledgeable About Debit Cards
We are all seeing the new Visa and MasterCard debit cards being advertised by our banks, and in many cases being sent to us to replace the "Pin (Personal Identification Number) Numbered" card that we have all become accustomed to using at the ATM.
Here are a couple of things, however, that generally neither the consumer nor retailer actually know about this new payment vehicle.
Retailers cannot tell a Visa/MasterCard debit card from a credit card, and want to be able to determine when a risk may be associated with a transaction and when there is no risk. In general, the retailer must pay a rate that is even greater than Check Guarantee, and must pay it 100% of the time, rather than selectively.
The average rate for a Visa/MasterCard debit card is 1.4%, which means that it has a higher cost on average than Check Guarantee, without many of the benefits of a check.
First, the debit card has spending limits. Generally, these are $300.00 in cash and $700.00 in purchases per day, or a total of $1,000.00 per business day. Your checking account permits check writing up to your last penny, and then some.
Use of debit is limited to your available account balance and/or your bankcard overdraft protection limit. "No balance" means no use of debit at the point-of-sale, even if the money is going to be there in the morning.
Check usage is much safer. While we may feel comfortable with our ATM machine and the protection of a PIN number, retail debit without the protection of a PIN number is much different.
The liability is limited to $50.00, if the loss is reported within two business days. Otherwise, the liability rises to $500.00. And, if the loss isn't reported within 60 days from the time a customer is sent a billing statement, liability is unlimited.1
Footnote:
1. The Sacramento Bee, Business Section, 9/12/96
