What Credit Card Fees Are Hidden on Your Plastic?
Banks commonly issue debit cards with an associated checking or savings account. Debit cards allow customers to withdraw and deposit funds into the associated account using an automatic teller machine.
Many banks now issue debit cards with a Visa or MasterCard logo. This type of debit card functions in a similar manner to a prepaid credit card, allowing users to make purchases from merchants that accept Visa or MasterCard.
The primary difference between a prepaid credit card and a debit card displaying the Visa or MasterCard logo is that the prepaid credit card is not directly associated with a checking or savings account.
Debit Card Secrets
Aways request a four-digit PIN number for your debit card. Many banks assign PIN numbers ranging from four to eight digits.
Foreign ATMs, however, will typically not accept debit cards that do not have four-digit PINs. Customers can change the PIN number associated with a debit card by going to a local bank branch and requesting a four-digit PIN.
When withdrawing money at an ATM, customers may have to pay a service fee to both the bank that issued the debit card and the bank that owns the ATM. These fees can vary considerably from bank to bank.
Many banks also charge an additional service fee for using ATMs at international locations. Always ask for a list of ATM fees prior to using a new debit card.
Additionally, take note of ATM fees charged by the owner of the ATMs. In most cases, owners of the ATM will disclose the fee with a notification that appears on the ATM machine.
Fee for Converting Funds
Banks may also charge a fee for converting funds to an international currency.
For example, if the account associated with the debit card is denominated in British Pounds, withdrawing funds at an ATM that issues dollars may subject the account holder to a currency conversion charge.
The interbank transfer rate is the actual conversion rate that the bank pays when converting currencies. Any deviation from this interbank rate is a fee indirectly passed to customers using a debit card at an international location.
Most prepaid credit cards also charge a fee for converting funds to an international currency.
Purchase at Merchants
When using the debit card to make purchases at merchants that accept Visa or MasterCard, customers may have to pay a transaction fee to the bank that issued the debit card.
Many banks also charge an additional fee for international purchases made using the Visa or MasterCard network. Banks can either charge a flat fee per transaction or a percentage fee based on the value of the transaction.
For example, a bank could charge a fee of 30 Pence for domestic transactions and three percent for international transactions.
Continue Processing ATM Transactions
Banks can choose to continue processing ATM transactions when customers do not have sufficient funds in the associated checking or savings account.
Banks will typically charge customers an overdraft fee in this case. They can also continue to charge this overdraft fee on a per transaction basis.
Therefore, if a bank approves five separate transactions that result in insufficient funds, the bank can charge five separate overdraft fees.
The ability to overdraft an account represents another difference between a debit card and a prepaid credit card. Since a prepaid credit card is not associated with a bank account, customers cannot overdraft a prepaid credit card.
Debit cards also offer the same fraud protection as a traditional credit card. In the event of fraud, all bank-issued cards in the UK impose a maximum liability of 50 Pounds for the customer.
This means that if your debit card is lost or stolen, you will not have to pay more than 50 Pounds for transactions made prior to reporting the card lost or stolen.
Additional Debit Card Secrets
- Remember to record all debit card transactions in the checking or savings account ledger. Failure to record transactions can result in negative account balances and overdraft fees.
- Protect your PIN number. Customers should not give their debit card's PIN number to other individuals. Additionally, when entering the PIN code at an ATM, customers should take note of their surroundings and make sure another person is not watching them enter the PIN.
- Do not choose a PIN number that another person would easily guess. For example, avoid using repeating numbers within the PIN code or personal information such as a portion of your birth date or national ID number.
- Customers should ask their bank about debit cards that participate in affinity programs. Many banks offer debit cards that allow customers to earn miles on airlines and other types of points for a reward program.
Banks now offer customers debit cards for most checking and savings accounts. While debit cards are not prepaid credit cards, they do offer many similarities to prepaid credit cards, allowing customers to withdraw money from ATMs and make purchases at participating merchants accepting VISA and MasterCard.
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