June 28, 2018 | Money Management

The Benefits of Using a Debit Card

The debit card. With it, you’re free to leave your cash and checkbook safely at home (and gain back some of the time you devoted to writing checks!) Today, you can use your debit card to complete a transaction in mere seconds and move on with your day. Despite their widespread use, few realize just how many benefits they offer. Read below for some of the perks you receive just for using a debit card!

Supreme Convenience and Worldwide Acceptance

With a debit card, money is deducted from your bank account (almost always your checking account). A hold is put on the purchase amount by your financial institution and the money that’s placed on hold pays the merchant in a process that can take anywhere from a few hours to several days. Debit card transactions are very similar to writing a check. Which is why one of the best reasons to carry a debit card is the supreme convenience it provides, including:

  • Automatic deduction of payments: When you use your debit card, cash is deducted from your checking account and sent to the merchant. Just log on to your financial institution’s website or mobile banking app to view your transactions. Some institutions display the pending transaction immediately; others will display the transaction once it fully posts to the account. (Your “Available Balance” should always show your correct balance, and account for any transactions that haven’t posted yet.)
  • Nationwide/Worldwide acceptance: Debit cards have quickly become one of the most widely used payment across the globe. If you plan to travel outside of the U.S., it pays to secure a debit card with a smart chip as well as the standard magnetic stripe. Chip cards add another layer of security to cards and requires the embedded microchip to produce a single-use code to validate a transaction, further protecting you from unauthorized use. This adds a layer of security that makes the chip card data much harder to steal and clone. Merchants across Europe will typically only accept payment from cards equipped with a chip—and regardless of chip or magnetic stripe, may charge a foreign transaction fee. [While most have already been converted, all Quorum debit cards will be fully converted by the end of 2018.]
  • Quick and easy cash withdrawal: If you need cash, access an ATM and quickly withdraw the funds you need. Just be sure you understand the various fees that may be involved with withdrawing cash from an ATM provider. Some checking accounts offer in-network ATMs with no fees, other checking accounts will reimburse you for using an out-of-network ATM. Most have some type of fee for withdrawing cash overseas. [Quorum offers two checking accounts: the QClassic account, which allows you to access over 90,000 ATMs nationwide; and the QChoice: access to that same network, but non-Quorum ATM fees are reimbursed up to $15/month, as long as you enroll in eStatements and maintain a minimum monthly direct deposit(s) totaling $1,000 or minimum average daily balance of $5,000. Click here for more information.] 

Enhanced Security and Fraud Monitoring

Identity theft has become one of the top concerns among consumers in the digital age. Fortunately, debit cards offer enhanced security through the use of a Personal Identification Number, or PIN. Additionally, a routine review of your transactions via your financial institution’s website or mobile app can help quickly identify and report fraudulent charges. (Most will offer notifications to alert you of activity on your account). Be vigilant of your accounts; while federal law limits your liability for unauthorized charges, your liability depends on when you report the charges. If you report fraudulent activity more than 60 days after receiving your statement, you’re liable for every dollar spent and all fees incurred.

Security also means protection for purchases you may have bought yourself. Many debit cards offer extended warranties, purchase assurance, and price protection, similar to credit cards. (Be sure to consult your Guide to Benefits to learn exactly how you are covered.)

Effective Budgeting Tool

Debit cards are not only convenient, widely accepted and secure, but they also offer great ways to budget your money. Most financial institutions will sort your debit card transactions into commonly used categories such as:

  • Automotive repair/maintenance: Includes tire rotations, oil changes, fuel, tolls, etc.
  • Groceries/restaurants: This category will help track your monthly food expenditures.
  • Health and beauty: Includes haircuts, nail salons, massages, etc.
  • Home maintenance: Trips to the hardware store for gardening equipment, light bulbs, etc.

Instead of keeping track of mountains of paper receipts, save time and allow your financial institution to total expenditures for each category for you.

Credit or Debit Cards — What Is the Difference and Which Should I Use?

While both credit and debit cards have unique advantages and disadvantages, debit cards can often be the best choice for consumers hoping to avoid impulse purchases or those trying to stick to a budget. Here are a few other important factors to consider:

  • Credit history and credit scores: To receive a credit card, financial institutions will perform a credit history check. If you have poor credit or no credit history, you may not be able to obtain a credit card, or will only receive one with a high annual percentage rate and low credit limit. To receive a debit card, you simply need to be approved for a checking account.
  • Control your spending: Debit card purchases pull funds directly from your checking account. If you spend more than what you have, you’ll likely get hit with an overdraft fee, or the transaction will be denied and subject to an insufficient funds (NSF) fee. To avoid this, transactions should be monitored carefully, and a proactive approach to budgeting taken. When you can spend more than what you have in your account with a credit card, the balance can quickly add up. (see example below).
  • Avoid credit card debt and rising interest rates: Carrying a balance each month on a credit card can add up without a disciplined approach. For instance, let’s say you’re in the market for a new LED TV for your home or apartment. If you use a credit card for this purchase, your payments may look something like this:
  • Initial purchase amount: $1,000
  • Annual Percentage Rate: 18%
  • Credit card minimum monthly payment for this purchase: $25.00
  • Total time to pay off balance and interest: 113 months (around nine years)
  • Total cost of your purchase: $1923.18

These numbers do not even take into account a rising interest rate environment, and also assumes you do not make any additional purchases with this credit card. If you did, and only sent the minimum monthly payment, the debt incurred would be difficult to eliminate.

If you missed a minimum payment or could not afford to make your payments, your credit score would suffer considerably, and it would potentially affect your future options to purchase a car or home.

While credit cards certainly come with their own perks and advantages; when it comes to money management, budgeting, security and convenience, debit cards offer great ways to keep yourself debt-free and on track for a bright financial future.

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