All posts tagged debit cards

Airline Debit Cards: Who’s Left In 2013?

airline debit card with "X" over itThanks to the Dodd-Frank Act that went into effect in late 2011, debit cards with airline miles have been going the way of the wooly mammoth. So who’s left and who’s been axed? Here’s a rundown for your reference, which I’ve updated for 2013…

AAdvantage Debit Card – Issued by Citibank, the $25 version = 1 AAdvantage mile per 2 dollars spent. The “premium” $65 version = 1 AAdvantage mile per 1 dollar spent.

Dead or Alive? Unfortunately both of the American Airline debit cards have been axed and they’re not coming back. Not even the existing cardholders got to keep ‘em – they’ve been issued regular ol’ debit cards as replacements.


Alaska Airlines Debit Card – A Bank of America product, for $30 the account earns 1 mile per $2 in purchase and for spending on flights and vacation packages from Alaska Airlines/Horizon Air, it’s 1 mile per $1.

Dead or Alive? This one is still around. To get it you will need to have a Bank of America checking account. You have to press “credit” when you swipe it in order to earn rewards. If you enter your pin, there won’t be any miles given.

Continental Airlines Debit Card – Run by the folks at Chase, for a $25 annual fee = 1 OnePass mile per 2 dollars spent.

Dead or Alive? This was actually one of the first airline debit cards to be cut. Chase terminated the program a few months before the new legislation went into effect. Regardless, something had to change with this card anyway, due to the United-Continental merger.

Delta Skymiles Debit Card –  Offered through SunTrust Bank, the consumer version is $75/year and gives 1 SkyMile per dollar. There are double miles earned on spending with Delta.

Dead or Alive? This is one the best airline debit cards because it gives 1 mile per dollar and fortunately, it’s still alive. To get it though you will need to have a checking account with SunTrust. The bad news is that they jacked the annual fee up from $25 in 2012 to $75 in 2013.

United Airlines Debit Card – Like the Continental card, this gave 1 mile per $2 for a $25 annual fee.

Dead or Alive? Chase nixed this one at the same time they killed the one for Continental.

US Airways Debit Card – Bank of America checking accountholders could request this optional card which offers 1 Dividend mile for each $2 in purchases, except for spending with US Airways which was $1 mile per dollar. The fee was $30 per year.

Dead or Alive? Sadly this one died in Sept 2012.

2013’s best alternatives?

Being that most air mileage debit card reward programs are no longer in existence, if you still want to earn miles on purchases, you might have to switch to using the carrier’s credit card instead. You can see a list of them here. My favorite is the one from Delta…Remember if you pay your balance in full, there won’t be any interest to pay. But if you’re a compulsive spender who will rake up debt, admittedly it is best to avoid credit cards altogether despite.

If you’re opposed to credit because it interferes with your budgeting, then going with a debit card will probably be the best alternative. However in 2013 unfortunately it won’t be possible to earn cash back through a debit card.

ATM Card vs Debit Card: The Differences You Need To Know

Q: Why do some people call them debit and others say ATM cards? Are they the same thing or are there differences between the two?

A: Like you said many refer to them as one and the same. The truth is they are quite different.

MasterCard debit cardWhat are ATM cards? These operate over a network of different banks connected together. Look on your card to find out which network(s) it can access: STAR, LINK, Cirrus, PULSE, PLUS, Interswitch, Interac. You will know you are making an ATM purchase/transaction because when you do so, you will be required to enter your PIN.

What are debit cards? These are much more common. You have the ATM capability mentioned above, as well as the ability to make purchases without a PIN over the Visa or MasterCard network, processed the same way as a credit card transaction (that’s why you have to select “credit” instead of “debit” to do this).
Debit Cards

Pros:

  • More versatility. Can be used for everyday purchases as well as banking transactions like deposits and withdrawals at ATMs.
  • For those prone to mismanaging their money, a debit card is a simpler option than a credit card, since you can spend only the money in the bank.

Cons:

  • Since no PIN is needed for debit purchases, if your card is stolen then fraudulent purchases can be easily made. With no buffer between the money in your checking account and the debit card, the criminal could easily deplete your checking account balance. Debit cards also have fewer legal protections against fraud than credit cards do (although many banks will be more generous than is required by law). Even though fraudulent purchases will likely be reversed, it doesn’t change the fact that during your checks may have bounced while you were sorting things out.
  • No rewards on purchases.

versus ATM Cards…

Pros:

  • The PIN is always necessary for a transaction. This might make fraudulent usage more difficult.

Cons:

  • ATM transactions outside your bank probably involve fees (both by your bank as well as whatever the ATM charges).
  • The legal protection surrounding PIN-based debit/ATM card transactions are flimsy, at best. You can see this for yourself in this FTC article.

Debit cards vs. ATM cards… which are better?

That depends on your needs. The part the scares me about both is that you might be liable for fraudulent transactions if your PIN was used to commit them — although things are changing in October, when it comes to MasterCard cards.

On the other hand, if fraud is committed without a PIN (as a credit transaction over Visa/MasterCard) the card’s zero liability protections come into play.

What’s the safest bet for 2015?

A prepaid card acts as a good safety buffer. If someone steals your ATM or debit card, they can spend your money and even if the bank refunds the money, it could still cause temporary problems like the checks you write for rent or car payments being bounced, because of insufficient funds. For that reason, I recommend going with a prepaid card like this for your purchases, so your bank account isn’t directly at risk.

However ultimately, you get the best fraud protection with an actual credit card. The Federal laws protecting you against fraud are much stronger for credit versus debit. With credit, the most you can be held liable for is $50 per incident (but practically all major credit cards waive the $50 “deductible” and give you $0 liability). If you need a good one to start with, here are 3 good options depending on your credit level:

Updated May 2015

Are Free Prepaid Debit Cards For Kids a Bad Idea?

swiping credit cardA recent trend has been for parents to get their kids prepaid debit cards. While this may seem like a logical thing to do, there are some major hidden pitfalls in doing so that you should know about.

1st problem: they may not actually be free!

As you can probably guess, most prepaid debit cards have fees… and a lot of them! Activation fees, cash withdrawal fees, monthly fees, and the list goes on. But are there any that are free? Not quite.

You see, most of the “free” prepaid debit cards require a minimum reload amount each month (for example, you might have to add $500 or more every month for it to be free). While that might work for an adult’s spending, as you can see the idea of getting free prepaid debit cards for kids won’t quite work, unless you spoil your kid and he’s a big spender!

2nd problem: prepaid debit is much more risky than credit cards

Another thing to consider when it comes to prepaid debit cards for minors is what will happen if they lose the card? Or worse yet, what if your kid says he lost the card when in reality he used the money for something he doesn’t want you to know about?

With a credit card, federal law limits liability on fraudulent transactions if you lose your card. By law the most the cardholder can be held liable for is the first $50 in fraud on an account, but in actuality, that rarely happens… almost every banks nowadays just takes that hit so the cardholder has $0 liability. Unfortunately prepaid debit cards are something totally different.

If your kids’ prepaid debit PIN number was compromised and funds were stolen, you will probably be out of luck. This is a double-edged sword, because even if you decided to deposit $500+ monthly to be eligible for a free account, at the same time you would be facing higher risk with having that much money in the account.

3rd problem: offer little to no monitoring for parents

As a parent, you probably want to keep tabs on exactly where the money is going if you’re providing them the money! Unfortunately even the best prepaid cards might not be able to give you the type of oversight you were expecting.

With credit cards, it’s possible to have highly-itemized transaction information for both the primary account holder as well as any authorized user (like your kid). You’ll be able to see exactly where they’re spending money by both the store and its category. With prepaid debit, all you may be left with is information like “$40 ATM withdrawal” and the date.

What are the best low-cost options for your kid in 2013?

Just about any major credit card on the market will allow you to add an authorized user (often for free) and you will even be able to set a monthly spending limit for them. For example, even if your credit line is $10,000 you can set it so your child can only spend $200. If you would like, you even be able to add your kid’s SS# to your credit card account so it benefits their credit. Yes, believe it or not, that is possible to do even for minors.

So adding your kid as a user on your credit card account is safer, allows for greater oversight and control, and their spending will earn you rewards (if you have a rewards card) making them clearly a better option than getting prepaid debit cards.

But if you still insist on getting your kid a prepaid card, then I would recommend you check out this prepaid card instead. It is not “free” but the fees are reasonable.
Written or last updated November 16, 2013

Can you use a debit card online?

debit card on computer keyboardQ: I don’t have a credit and would like to know, can you use a debit card online?

A: Nowadays most debit cards issued in the U.S. are associated with Visa or Mastercard. If your debit card has one of these logos on it, that means purchases can be done either under “debit” or “credit” (this is why you are asked that question when you swipe your debit at a store). When you buy something online with a MasterCard or Visa debit card, the system will automatically process it as a “credit” transaction. So you can use debit online as long the card has a Visa/MasterCard/AmEx/Discover logo on it.

But be warned because because, unfortunately, debit cards do not confer same consumer rights as credit cards. The laws for fraud liability and other protections are substantially weaker with debit, as they were written back in the days when debit cards could only be used at ATMs to get cash. That’s why almost anyone would be better off (and safer) to have a credit card for designed for bad credit or limited credit than having only a debit card (that is, if you’ve avoided getting one in the past due to your perceived inability to qualify).
When you’re at a store and select “debit” it will ask you to enter your debit card’s PIN. However when you select “credit” it will be processed like a regular credit card transaction that you sign for. Now that doesn’t mean you are actually buying on credit… it just means your purchase is processed over the credit card network before withdrawing the funds from your checking account. Debit card issuers actually prefer that you do this rather than entering a PIN because they collect much higher interchange revenue from the merchant when transactions are processed as credit.

*IMPORTANT* Just because you can use a debit card to buy things online, it doesn’t necessarily mean you should. Here’s why:

Debit cards don’t give you the same protection as credit cards. If your credit card account is fraudulently used, by federal law the most you can be held liable for is up to $50 (and the vast majority of banks won’t hold you liable for anything). Of course, you still have to notice and report the fraudulent activity to your card issuer to have any charges removed.

However, with debit card fraud the law states your liability can be up to $500 if you don’t notify the bank within two days of the fraud and potentially unlimited if you don’t report it after 60 days. While it’s true most debit card issuers voluntarily give customers the $50 cap, there have been many reports of them not always honoring that.

Last but not least, credit cards offer a number of other benefits on your purchases. For example, if your eligible purchase is stolen or damaged during the first 90 days, it would be covered for free if you bought it with your American Express card, for example.

So can you use a debit card for online purchases? Yes. Is it the best option? No.

Written or last edited on August 25, 2014

It’s Not Y2K, But 2010 That Hit German Credit Cards

Remember the hysteria that surrounded the year 2000? Many believed it would bring about the end of the world! People were pitching their survival products. Some were saying gold coins were the only solution post-Y2K (sounds like today, huh?). But then when the clock finally struck midnight on December 31st that year, nothing happened!

The world did great job preventing that, but apparently, there are some folks in Germany that overlooked a similar glitch for the year 2010. On New Years, 20 million of their debit cards and 3.5 million of their credit cards stopped working. Some estimates even place that number high, at more 30 million affected cards… that’s about 1 in 4 bank cards in Germany.

This was the result of an error in the code, which supposedly made it impossible for the cards’ microchips to process the year 2010. (Meanwhile, it should be noted that most debit and credit cards in the US don’t use microchips. And when they do have one, it’s used for things like contact-less payment. If the chip was broken, the transactions can still be processed by swiping the card.)

So who’s responsible? Blame it on the French. The French company, Gemalto, which manufactured the affected chips takes full responsibility for the problem. They’re working around the clock to try and figure out a solution which doesn’t involve replacing the affected cards.

As a result, some estimates say the economic damage is in excess of $300 billion Euros (or about 430 billion in U.S. dollars). Way to go Gemalto!