Debit Cards 101 – Basics you should know

Jan 21st, 2015     Banking

Debit cards give customers access to the money in their checking or savings accounts. Customer with debit cards can use the cards for withdrawals of cash through ATMs and for making payments at most merchant locations or online. There is a magnetic strip at the back of the debit card; this strip has encoded data that make it possible to access the funds in checking account electronically. Recently, banks have also started issuing EMV chip debit cards which are considered more secure than traditional magnetic strip.

Debit cards

How debit card works?

Customers who store their money in checking accounts are issued with a debit card. This card is usually delivered by secure mail. Customers can visit the branch and collect the debit card too. Customers will also be sent a pin number along with their debit card. After receiving the pin number and debit card, customer should go to an ATM to activate the card. ATM will request the customer to enter the pin number after inserting the card into the machine. Bank will request the customer to sign behind the debit card after receiving it. As pin number works as password, financial institutes request customers to keep it private and confidential.

Customers have the options of changing their pin number by following the instructions on the screen. It’s simple and easy to use a debit card as all the instructions will be given to you on the screen after inserting the card into the machine. Apart from making withdrawals customers can use debit cards at stores to make purchases too. At a store customer can give the debit card to shopkeeper to swipe the card in the card machine. Sometimes customers have to enter their pin number into the card machine. After swiping the card, the machine will give two receipts of bill for the purchase made. Customer should sign on them and give one to the shopkeeper and keep one with them. These receipts work as payment proof, and the transaction will appear in the statement too. Debit cards can only be used for shopping, provided the retailers have the option for the same.

Cards Swipping Machine

Debit cards can be used online to make purchases as well; online customers may have to enter the pin number to process the payment. But that’s not the case with all transactions. Sometimes customers get to set up a security code through visa, maestro etc. These security codes act as passwords for making online purchases. Customers should follow the instructions on the screen and key in the required information online to make the payment successfully. Sometimes to make a payment online, you may just have to enter the last 3 digits at the back of your debit card to process the payment. This code is known as CVV, CCD and secure code. American express cards have this code on the front of the card. Usually the information required would be 16 digit card number, name, address, expiry date of card, security code etc

CVC code debit card

Benefits of debit cards

View balance: Customers with a debit card can view their balance by using their debit card at an ATM. For this the customer has to insert the card and enter the pin number on the machine, and then the customer has to select the option view balance to know how much cash is available in their account.

Safe and secure payments: Debit cards are issued to customers only after all security measures are taken by the financial institutions. Many banks call customers if there is any unusual activity on the account. If funds debited the account without customer’s consideration then the bank will run an investigation and credit the customers account if it’s proved that the customer didn’t make the payment. Visa, MasterCard, Maestro etc are famous debit cards issuers, these brands have their own security system to help customers process payment safely. Payments made via debit cards can always be investigated, any fraudulent activity can be traced due to security system set up on debit cards.

Saves time: Customers with debit cards don’t have to wait in branch to withdraw funds. Whenever customers require the funds, they can go to the nearest ATM around and withdraw funds as and when required.

Easy access to funds: If customers don’t have a debit card, they are limited to branch timings to withdraw funds. However when customers have a debit card they can use an ATM 24/7. Most of the ATM machines are open throughout without any closing or opening timings. Therefore customers have easy access to funds.

View recent transactions: Customers can check the recent transactions done at an ATM. This way customer can keep a tab on their expenses.

Transfer money to friends accounts: Some ATM’s offer customers to make payments to their friends and family after inserting a debit card.

Easy to carry: Compared to cash it’s much easier to carry debit cards. They require less space and are light in weight mostly.

Debit card rewards: Some customers get additional benefits for using their debit cards. For this they fill forms and enter contest where they cards accumulate points for making purchases at stores where these rewards are available. Later these points would give some gifts or benefits based on the contest and features offered.

Online shopping: With online shopping customers not only save their time but they also get the option of purchasing goods that are available in different parts of the world.

Therefore we see that there are many benefits of using a debit card, customers will experience different kinds of benefits once they start using them. Some banks, credit unions and online banks might offer additional benefits on debit cards such as low interest for international withdrawal and transactions. However the customers have to pay an additional fee to attain such features on a debit card.

Debit card Vs Credit Card:

The major difference between credit and debit card is that customers with debit cards use their own money stored up in the account and thus don’t have to pay any interest for using the same. However, customers with credit cards use banks or credit unions money and they have to pay interest for using the money loaned on the card.

Customers with credit cards have to make regular payments towards their credit card if any money is owned on the cards. If customers with credit cards fail to make a minimum payment as agreed in terms and conditions additional charges will be incurred on the account. Customers with debit cards don’t have any additional charges to pay until and unless they don’t go into a negative balance on the account.

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Checking Account 101

Dec 15th, 2014     Bank Account

Checking account is a bank account which helps you manage your finances easily. A checking account is an active account on which all kinds of transactions can be processed. The most common services and features available on a checking account are check book, bill payments, debit cards, international payments, inter account transfers, and automatic transfers such as direct deposits and standing orders. Apart from making payments, customers can use their checking account to receive payments and deposits too.

How to open a checking account?

It’s wise to do a proper research before applying for a checking account, as customers will be provided with different type of options on a checking account. In these cases it’s best to apply for the account that’s most suitable for you.

Some of the options are listed below –

Minimum balance to maintain the checking account:
Most of the checking accounts require a minimum balance to be maintained in the account, as this will stop the customers from overdrawing on the account. Such accounts, will charge customers if the minimum balance is not maintained on the account. Hence the customer should choose an account where he can easily maintain the minimum balance.

Limited number of checks, bill payments and other payment services:
Checking accounts come with different type of options. Some of them provide limited number of checks and check payments, limited number of bill payments, direct deposits and standing orders. Hence it’s advisable for customers to read and know these options, before opening an account.

Debit Cards:
Checking accounts provide customers with different type of debit cards. For example some debit cards can be used for withdrawing cash only and customers cannot make purchases with it. Some debit cards can be used in different countries; there is a charge for international transactions. Therefore, it’s advisable for customers to check the type of options they have on the debit card before applying for it.

Overdraft facility and protection:
Checking accounts have different options with regards to overdraft facility and protection. In case of emergency if customer is unable to make payments, some checking accounts might offer the option to transfer funds from an easy to access savings account to help the customer process the payments successfully. This can help customers to avoid going into a negative balance on the account. Some checking accounts have overdraft facility, wherein customer would be offered a limited credit on the account. If the customer uses this credit offered by the bank, then would be liable to pay a low interest rate as agreed during the time of opening the account.

Customers who wish to open a checking account should have a decent credit score, as the banks, credit unions and online banks would give a checking account to customers with good credit history.

Different type of checking accounts:

Free Checking Account:
This type of checking accounts does not require any fees or minimum balance to be maintained on the account. Customer can open the account for free, whereas there is a possibility that this kind of account will offer customers with checks, debit card, bill payments etc. However other bank charges such as charge for stopping checks, charge for going into a negative balance etc would be applied on the account.

Basic Checking Account:
This type of checking account usually requires a minimum balance or fee in order for the customers to use the account. The fees vary based on the amount to be maintained. Such accounts might give limited checks and payment options.

Joint Checking Accounts:
An account owned by two or more people is called as a joint checking account. On such accounts all the parties will be issued with checks, debit cards and online banking options. In some case the bill payments and other payment options can be limited to a single partner on the account.

Student Checking Accounts:
Such accounts are offered to students who are resident of USA and also for student from overseas. Such accounts usually have a low maintenance balance and fee. Students can enjoy free checks, bill payments and debit cards facilities on the account with an added benefit of low interest rate on loans and credit cards that are especially offered to students.

Senior Checking Accounts:
Customers who are 55 years and above can apply for a senior checking account. There is a possibility that such accounts have special rates and offers for traveling, purchasing medicines etc.

Checking Accounts with Interest:
Some checking accounts credit customers account monthly or annually with interest on the balance maintained in the account. Such accounts usually require a minimum maintenance balance. If the balance goes below the minimum amount to be maintained in the account then the customer would be liable to pay high charges on the account.

Express Checking Accounts:
These accounts are suitable for customers who wish to bank electronically via internet, telephone, Atm’s and mobiles. The fees and maintenance balance are comparatively low. However if a customer requires bank or credit union staff’s assistance with their finances then would have to pay an additional fee to have an appointment with them.

Green Checking Account:
This type of accounts usually charge low fees and low minimum balance to be maintained on the account. It’s because such accounts have the option wherein they support environment and avoid plastic, paper usage as much as possible to protect the environment. Green checking accounts have different debit cards options and there is a possibility that no paper statements are sent on such accounts. If customer requires paper statement then they have to pay a fee for the same. Fees vary depending on the number of statements required.

Premium Checking Accounts:
Such accounts are suitable for customers with huge funds. The minimum balance to be maintained on such accounts is usually high it can be $1500 and above. Customers have to pay high fees to maintain such accounts but enjoy some special benefits. Some insurance, loans, credit cards and savings account will be provided at a good interest rate. Premier account customers might get to withdraw funds for free while traveling abroad.

Business Checking Accounts:
These accounts are suitable for businesses to manage their finances, pay salaries and make purchases. The offers and accessibility options can vary between the account holders on such accounts.

We see that customers have loads of variety while choosing a bank account. Based on the needs and requirements customers can opt for the checking account that’s most suitable for them. It’s always secure to opt for accounts where customer is able to maintain the minimum balance and fees. Credit unions and online banks might require minimum balance anywhere between $1 and above. The fees and charges vary widely.

Benefits of Checking Accounts:

Checking accounts help customers to manage their finances. There are loads of benefits which the customer can enjoy with checking accounts some of them are listed below.

Receive Deposits: Customers with checking accounts can receive payments from employers, family and friends easily. These deposits can be made electronically or via a check. If the credit transfer is done electronically then the funds are likely to be available faster than a check deposit on the account.
Make payments: Customers with checking accounts can make payments electronically, via checks and debit cards. We see that customers with checking accounts have many options to make payments hence this makes it easier for them to manage their finances.

Time Saving: Customers with checking accounts don’t have to go physically to give cash for their payments or receive cash for their deposits. This way it helps them save a lot of time while dealing with their finances.

Online Shopping: These days, almost everything can be purchased online right from household requirements to luxuries. Therefore customers can sit anywhere is the world and make online purchases with their debit card.

Investments, loans, insurance, credit cards, mortgage and savings: Customers with checking accounts can opt for all these easily. When customer have a checking account it becomes easier to apply for a loan, savings accounts, mortgage, credit cards etc.

Keep a tab on their finances: Customers with checking accounts can view their statement and manage their finances easily.

Debit Cards: Customers can withdraw money from an ATM easily when they have a checking account. With debit cards customers can make purchases at shops too.

Safe and Secured Money: When customer keeps they funds in a checking account they can be assured of the safety of their money, especially if the funds are insured by US government.

Online Banking: Customers with checking accounts can use online banking facility to make payments, transfer money between accounts, check recent transactions, make international payments etc. This way they can manage their accounts easily with checking accounts.

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