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Debit Cards

In recent years debit cards have risen in popularity, often replacing payment by cash and cheque. A debit card is unlike a credit card in that it is tied directly to a chequing account. When you make a purchase with a credit card, you are taking out a loan of money from the card issuer, whereas a debit card purchase withdraws money from the account to which it is tied.

Because your debit card is tied to your bank account, there are specific considerations and precautions to keep in mind when you use them.

Stay in Check

Always know your current bank account balance and available funds. And don't forget about cheques that haven't cleared your account.

Consider opening an online banking account that allows you to manage debit card purchases, cheques and bill paying all at once. You'll have a one-stop shop for managing all the ins and outs on your account.

Know Your Limits

Many debit cards have daily spending and cash withdrawal limits. These limits are meant to protect you in case your card is stolen. But remember, your card might be declined if you exceed your limits even if you have enough money in the bank. Know your limits and contact your lender if you need to raise or lower amounts.

Also remember to track your spending. When you make a purchase, withdraw money from your account or pay bills that exceed your account balance, you may be subject to "overdraft fees." Some financial institutions offer overdraft protection, and they'll cover your cheque or debit transaction so it doesn't bounce. But this protection often comes with a price tag too. You may be charged a fee for each purchase that uses overdraft, as well as an additional fee for being overdrawn. Balance your account regularly to avoid added fees.

Stop Surcharges

Many banks charge a fee if you use another institution's ATM with your debit card, and they usually charge non-account holders to use their ATMs. Instead of paying extra, choose a bank or credit union with ATMs convenient to where you live and work or use your debit card to get cash back when making purchases.

Be Secure

For maximum security, take advantage of free alerts for your debit card. Some financial institutions offer automatic account alerts by phone and email.

Receive Customized Alerts When:

  • ATM withdrawals or any debit card activity exceeds your set dollar limits
  • Your online ID or passwords change
  • Large transactions are made
  • Unusual activity on your account in other far away provinces and territories

Keep a Secret

Your debit card will require a Personal Identification Number (PIN) for security. Choose a unique number. Avoid obvious choices like your address, phone number or birth date.

Always keep your PIN private. Memorize it. Don't write it down anywhere. And never tell it to anyone. If you feel your PIN has been compromised or someone may have identified it, change your number immediately by contacting your financial institution.

Hit the Road, Plan Ahead

Like credit cards, debit cards are accepted at millions of locations worldwide. Remember for your protection, usage across Canadian and international lines can cause a fraud or security alert with your financial institution if it's different than normal spending patterns. If possible, let your bank know your travel plans in advance.

Know When They Hold Them

In some cases, a transaction that is not yet complete will require that a certain amount of money in your account be held, or earmarked, for that transaction. When you check into a hotel, for instance, your card is authorized and funds covering the length of your stay are held. But the money isn't deducted from your account until the final cost, which may include room service charges or phone calls, is known. This protects you and the hotel owner by ensuring that the correct amount of money is available when the transaction is completed.

Debit Cards – The Extra Protections

Did you know that many of the same features and protections offered by credit cards are also offered with debit cards?

  • Zero Liability: This generally means you're not liable for unauthorized purchases made on your debit cards as long as you notify your financial institution immediately. Check with your financial institution to make sure Zero Liability applies to your card.
  • Funds And Fraud: Federal law mandates that financial institutions replace funds for losses resulting from fraudulent card use within ten business days of notification. However, in many cases, you'll have access to funds within five business days of notification — sometimes sooner.
  • The Right To Dispute: You may have dispute resolution options should an issue arise with a debit card purchase. This often applies to signed purchases only. Check with your card issuer, and save all of your receipts.