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Understanding Debit Cards
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Michelle
Financial Expert
Posted April 6, 2017
Debit Cards 101
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Debit cards are a convenient way to access the money in your checking account, but many people confuse them with ATM or credit cards. While all three have common features, there are key differences. Like ATM cards, debit cards can be used to deposit and withdraw money at ATMs. But they can also be used for purchases, like a credit card. However, a debit card is linked directly to a checking account, meaning you use money you already have on hand. A credit card is a type of loan that needs to be paid back. Although you can run transactions as credit, debit cards will not help the user build credit history.
PIN-Based Transactions
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When making an in-store purchase with a debit card, you will typically be given the option to run the transaction as debit or credit. If you choose the debit option, you enter your Personal Identification Number (PIN), and the money is withdrawn from your checking account almost immediately.
 
It is harder to prove fraud or dispute a transaction when a PIN is used, because the PIN is your
your Personal Identification Number, and only you should know it. However, entering your PIN also increases the chances of someone seeing it. Fraudsters look over people’s shoulders – also known as “shoulder surfing” – to try to steal PINs. Always be aware of your surroundings before entering your PIN.
 
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Instead of entering a PIN, you can use your debit card to run a credit transaction. This means you sign for the purchase, as you would when using a credit card. Because your PIN is not involved, this type of transaction is easier to dispute if fraud occurs. It is also helpful with returns if you misplace the receipt. Merchants pay a small transaction fee when a credit purchase is made and will typically keep a record of the purchase on file, making returns more convenient.
 
While money from a PIN-based transaction is withdrawn right away, credit transactions are processed at the merchant’s discretion. The money could be taken out of your account the same day or over a week later, but most transactions will usually post in two to three business days.
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