Consumers are using debit cards at the check-out counter more than ever before. Next year, debit-card transactions, which deduct funds directly from a checking account, are expected to pull ahead of credit-card sales in market share.
The November issue of Consumer Reports offers these five tips for getting the most out of a debit card and being aware of the "gotchas:"
- Know fraud liability. Under federal regulations, a consumer is liable for up to $50 if a debit card is reported lost or stolen. But, debit cards with Visa and MasterCard logos have zero-liability protection. Though there are loopholes, Consumer Reports recommends that consumers stick to debit cards that carry one of those logos.
- Limit fraud exposure. Debit cards that use a PIN (personal identification number) for approval are 15 times more secure than signature-based transactions, according to experts. The vast majority of debit cards can be used with either a PIN or signature. Consumer Reports recommends that consumers get a PIN-only debit card and verify that stores they frequent are on the card-issuer's network.
- Avoid ATM fees. Some stores allow consumers to get cash back on a purchase when they use their debit card. This tremendous convenience can help consumers avoid ATM fees of up to $2 charged by banks that are not their home bank. However, consumers must make a purchase and the store may limit the amount of cash they can get.
- Watch out for merchant charges. Typically, networks for processing debit payments do not allow merchants to tack extra fees onto purchases, but some do. Consumer Reports advises consumers to complain to the store manager, cancel the sale if the fee is not waived, buy elsewhere in the future, and complain directly to the card issuer.
- Forget about the rewards. Some banks offer reward programs that let debit card users collect points, usually for transactions complete with a signature rather than a pin. Consumer Reports notes that debit-card benefits equal only about a 0.5 percent rebate on each dollar spent and that it could take years to rack up points for a reward. Banks charge retailers significantly more to process signature debits than they do PIN-based debits. Congress is investigating these programs, so they may not be around long enough for a consumer to collect.