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November 05, 2007

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1. I don't believe so, the way I understand debit cards is they are rejected if the user doesn't have the funds in the account it's tied to. I have seen this happen a couple times at gas stations when the people try to get cash back. Of course, the danger here is if she drains the account and an outstanding check hits the next day before the account is replenished.

2. I have never paid a transaction fee by using a debit card at a retail establishment. In fact, they prefer you to use debit cards since they don't get hit with the merchant fee charged when credit cards are used.

3. I know some rental car agencies won't let you use debit to reserve a car, but am not aware of any other travel restrictions. The biggest one in this case would probably be the $500 limit you keep in the account. Couldn't you just charge plane tickets, etc for her and be reimbursed?

4. As long as it has the Visa/MC logo, a debit card will be accepted everywhere credit is. Most people use credit cards for online shopping, however to limit their exposure for fraudulent charges or having the account # stolen.

Good luck.

1. You can overdraw on a debit card and be hit by the fees, however it is a lot harder to do so. For whatever reason the limit on debit cards is a much harder limit than credit cards, so generally it is hard to do so unless you make several transactions in a short period of time (say a couple of hours) that cause the account to be overdrawn.

2 and 4. They will take it and you don't pay fees, as long as the merchant takes that kind of card aka. Visa or MasterCard.

3. Yeah as noted above, you can't rent cars on a debit card, beyond that I can do anything else. The hotel and such, ties up a set amount same as the credit card but is never a concern.

I only use debit cards for all my transactions. The only real reason for credit cards is a back up (college student, no real savings) at least for me. I never write checks, I barely use cash, I pay all my bills online, I shop online and at all kinds of stores and never have any problems.

This is really hard. I am in a similar position with my grandfather. I have found that if you talk to the bank (in my case commerce) you can ask them to disable the ATM fuction. Also, get her set up with online banking so that you can see her spending in real time.

Yuo can get hit w/ fees with the debt card. Would a secure credit card be an option? You fund it and it can only use the amount given. THey have something similiar for teenagers.

#1) If no checks are being used then I do not believe an overdraft can occur, although you should ask the bank where the debit card is drawn.

#2) There are no transaction fees for a retail purchase, although you will pay fees for an out of network ATM, again ask bank.

#3) Not sure about hotels/rentals locking balance. I think though that it varies per hotel or rental service. Talk to those services and work out some other collateral if necessary. Also, there is usually a limitation on the amount of money withdrawn daily from an atm, for instance mine is $300 daily. Also there is a limit for direct check charge, non-credit transaction but is done through a swipe, for instance mine is $700 daily, again ask bank.

#4) If a retailer takes a visa/mc credit card then they absolutely accept a visa/mc debit card. No problems for phone or online retail, works just like a credit card. In some cases, like online retail, a debit card may be safer since there is typically a lower limit on the account.

#5) Nope, but take these questions, and comment info, to bank and ask a rep. You may get a blank stare from years of retail service but press for answers.

Talk to a few banks/credit-unions I would not be surprised to find out they have special accts for this type of situation.

As someone who works for a credit union, I recommend you find a credit union for the debit card account. You will pay far less in fees than any bank.

To clarify some things, a debit card can be used in three different ways. It can be used for signature transactions (where you have to sign the receipt). It can be used as a debit/POS (point of service) transactions where a PIN is required. And it can be used at an ATM where a PIN is required.

If you use it for signature transactions, there is a much better possibility of overdrawing the account that the card is tied to for the following reason: Transactions do not post immediately. When you do a signature based transaction, an authorization is performed to verify that the account has the necessary funds. If it does, then those funds are put on hold for a certain amount of time. If the transaction does not come in for settlement against the account within that time, the funds can be released and used for other transactions. The most likely situation that causes this is where the merchant runs the transaction, but does not submit them for settlement in a timely manner. Another might be a Mom and Pop merchant that does not use an electronic means of authorizing the card (where no electronic hold is placed on the funds in the account).

A debit/POS transaction is very similar to an ATM transaction in that once you enter your PIN and the transaction is authorized, the funds are pulled from your account and are no longer available.

Merchants are the ones who pay interchange fees (fees to major networks for the use of the network to conduct business). Consumers never pay transaction fees for signature based or debit/POS transactions. ATM fees are a given if you go out of network.

If used properly, the account will never be overdrawn through using debit/POS or ATM transactions only. The possibility arises with signature based transactions. If checks are being drawn on the account too, then that compounds the problem and increases the possibility of overdrawing the account.

Instead of a debit card, give her a prepaid MasterCard. When the money runs out, the card does not work. There are many local places to get these cards, even local gas stations. However, I would suggest you do some research in to reloading, i.e. can this be done remotely and can it be done over the internet. If you find these things can be done at your convenience, you will not have to ever worry about overdrafts or fees.

First let me just say that I work for a bank and not all banks have the same rules and it is a good idea for you to go and talk with someone at your local branch and explain your situation and the concerns that you have.
1. Absolutely you can overdraw a checking account with a debit card and face penalties even if you aren't writing checks. There are some banks that will decline but some banks will let you charge over your balance up to an undisclosed amount (usually different for different people)then charge you an NSF fee for each transaction that clears beyond your balance. Plus some businesses namely gas stations only hold $1 until the transaction clears days later and it may look like you have money when in fact you don't.
2. Typically it has been my experience that the bank will not charge you for retail transactions but again some banks do and apparently they aren't doing a good job of letting customers know they do this or are going to start charging. (see MSN article: http://moneycentral.msn.com/content/Banking/Betterbanking/P86737.asp).
3. Yes, using your debit card for hotels, plane tickets, and rental cars will usually tie up a chunk of money most often more than what will eventually clear and sometimes twice as much. Again this can cause fees even though the whole amount won't clear if it looks like your account is going to overdraw because the hotel is holding 150 instead of 75 then you will be charged. It is not impossible to use your debit card for this but I don't recommend it.
4. Generally as long as Visa/MC is accepted debit cards with the Visa/MC logo are also accepted. I have heard of a few small businesses that will say you have to spend a minimum amount in order to use a debit/credit card because they have to pay fees for each transaction that is run and it simply is not cost effective for them to let you swipe your debit card for $1.75. This will depend on the merchant and where they have their "merchant services" housed. Ordering by phone or online is not usually a problem but if you were to have fraudulent charges it is much easier to get them refunded if it is a credit card
5. I have no experience in the situation you are in but I would recommend that she have a credit card that you specify the limit for, if you talk to the card company you can have them set the limit you desire and then she can not go over that and I believe transactions over that amount will be declined. She can also have a checking account so that she will have access to cash but if you don't order checks or a debit card then she would have to withdraw money from a branch which will keep the account positive, I don't believe this would be much of an inconvenience since most places accept credit cards now and she can have her bills paid through a bill pay service.
Here is another article on MSN that may be helpful:
http://articles.moneycentral.msn.com/Banking/BetterBanking/WhenBanksTurnEvil.aspx

I only use a debit card and I've had no problem using it to buy plane tickets. I've never used it for a hotel or car rental. But (at least for my card) you can absolutely be overdrawn, and be hit with the same penalty fees as if you had used a actual check.

But there are the prepaid credit cards, like Visa Buxx, or just plain cards bought from the bank. There's a small fee to load the card, and you have to track the balance, because if you make a purchase for more than what's on the card, the transaction will be denied, even if there's money on the card. They can be reloaded, and used the same way as regular check cards. There's probably not the same protection that you get on your purchases as what's offered by regular credit cards, but most vendors have return policies that make it a non-issue. One thing is you may not be able to stop the card if it's lost. But I think they're pretty convenient.

rdub98.....

Completely untrue, banks do not charge fees for using debit cards. Banks do make between 15-30 cents on each transaction, but this is not paid by the consumer, at least not directly. It might already be reflected in the price of the item.

Please do not mislead people by making statements like that, and oh yea, thanks for working for a business that does not have to pay taxes (dang credit unions)....what a sweet deal.

You can and will lose all sorts of money using a debit card and signature based transactions. Banks have been allowing people to overdraft more and more as it generates all sorts of revenue. They also process the charges from large to small, so the fees will be larger

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