Once upon a time, in the era before Debit Cards, financial savvy people would charge every day items and periodic expenses on their credit cards, paying off the balance at the end of the month; taking advantage of the float, rewards, extra warranties, and consumer protection.
Then the banking industry had the brilliant idea of combining the function of the credit card with the function of the checking account, and the debit card, or check card, was born.
The idea was pretty simple: why write a check, when you can just swipe your check card? And the check card looks like a credit card but works like your ATM card, swipe it, sign, and the amount is deducted from your checking account as if you wrote a check of some sort, with no reconciliation at the end of the month.
Simple enough, most consumers loved the idea, and it has spread so much that now it is virtually impossible to open a checking account and have a plain old fashioned ATM, 99% of the times, the de-facto standard is a check card.
Did you switch from charging everyday expenses like grocery, gasoline (or shall we call it liquid gold?), besides losing on the float, and missing out on potential rewards (Airline Miles, Reward Points, or Cash Back), there are a items that you might want to consider:
- Credit Hold: let’s say you go to the gas station to fill up your car, pay at the pump, and you pay by Check Card. Chances are the system is going to ask you to swipe your check card before you start pumping. Well two things happen in the background: when you first swipe your card, the system asks for a credit authorization to your bank, and then once you are done pumping, the proper amount is charged to your checking account. The problem is the original credit authorization or credit hold, takes a few business days to be released, and often it amounts to $ 75. So if you spent $ 60 in gas, your available balance has been decreased by $ 135, and if you run a tight ship those $ 75 might make A LOT of difference, and if you were relying on that $ 75 to clear checks that you have issued it will trigger an overdraft, where banks often tackle overdraft fees in the $ 25-$35 range. Did you know that?
- Maximum Liability For Unauthorized Use. If your credit card is stolen or your account compromised in any way, you are liable for only the first $ 50. It’s the law, says the Fair Credit Billing Act. Not so for a Check Card. Your Check Card doesn’t fall within the Credit Billing Act and it is regulated by the Electronic Funds Transfer Act, and your liability depends on many factors including how quickly you report the loss, how responsive your bank is; since these Check Cards and ATM cards might have unlimited liability under certain circumstances.
- Consumer Protection: if you pay for a purchase by Credit Card, and then there’s a problem with the transaction, your duty is to try to solve the issue with the vendor, and if your efforts go nowhere, you can dispute the charge with the Credit Card issuer who will immediately remove the charge from your account, debit a chargeback to the vendor, which is a good deterrent in solving the issue. Not so with a Check Card, or not always, some banks have extended similar protection to their Check Cards, be sure to read all the fine prints and to stay up to date with the updates to the Terms and Conditions of your Bank.
We hear of many people switching back to a credit card for every day use, often tallying up on a weekly basis their charges and sending one payment per week to their credit card in order to avoid overspending, which is now very easy since every major bank offers online banking with bill pay as part of their services.
Good credit cards for every day use are those credit cards that offer rewards in terms of Airline Miles, Reward Points, or Cash Back.
For a vast array of credit cards suitable for every need visit Chase “Find a Card” web tool or Citibank’s CitiCards.com comprehensive site.