Since the beginning of this year 8.5 million new debit cards have been issued through VISA or MasterCard members. This brings the current total of U.S. cardholders to 38.9 million or an increase of 28% since January. Based on current commitments more than 50 million Americans will be carrying and using debit cards by year's end, representing an explosive annual growth rate of 68%.
What is a debit card ?
How does it compare to a credit card ?
The best description of a debit card is a payment card that replaces your checkbook. Considering the some consumers are confused as to what a debit card is, VISA decided, last month, to rename its VISA Debit Card: The VISA Check Card.
To help consumers get over the debit learning curve, both VISA and MasterCard have launched major consumer education initiatives. MasterCard's program involves educating bank personnel who deal directly with customers. The program called "Face to Face" will train front line bank staff to educate and promote debit usage. VISA will roll-out its campaign, in the fall, with seminars and lecturers nationwide to explain the benefits of debit. VISA also has released a free consumer booklet on debit which is available through issuing banks or by sending a self-addressed, self-stamped envelope to: VISA Debit Booklet, Box 8999, San Francisco, Ca., 94128.
The debit confusion is probably fueled somewhat by the variety of cards offered. For example MasterCard offers MasterCard Debit, Maestro and Cirrus. VISA offers VISA Check Card, Interlink, Plus, (and Electron in Europe and Latin America).
First off, all the debit products listed above are not really cards they are "marks" added to ATM cards issued by your local bank.
If your bank's ATM card carries a VISA or MasterCard logo on it then you can pay for purchases at any merchant accepting VISA or MasterCard worldwide. The difference between a credit card and the debit card is the purchase will be subtracted (or debited) from your checking account instead of being billed at the end of the month. If you are using an enhanced ATM card with the VISA or MasterCard logo or mark on it there will be a float of 2-3 days before the funds are deducted from your checking account. In other words you are issuing an electronic check.
If the ATM card you are using carries the Maestro or Interlink mark you can use the card to make purchases at any merchant displaying the Interlink or Maestro logo. The difference between Interlink/Maestro and VISA Check Card/MasterCard Debit is purchases are withdrawn from your checking account the same day (requires a PIN number, very similar to withdrawing cash from an ATM). Even though MasterCard owns Maestro and VISA owns Interlink you cannot use the cards as widely as VISA and MasterCard credit or debit cards. Currently 20,000 merchants in the U.S. accept Interlink and about 5,000 accept Maestro. However, the number is growing very rapidly.
Cirrus and Plus are also marks added to ATM cards and credit cards. Both marks represent ATM networks owned by VISA (Plus) and MasterCard (Cirrus) which enable cardholders to obtain cash worldwide.
Basically debit cards give you all the advantages of a VISA and MasterCard credit card: convenience, worldwide acceptance, security, financial management, etc. The only difference is the way purchases or charges are settled. With debit, payments are made quickly and thus avoid the interest charges incurred by most consumers on credit cards. Therefore debit is ideally suited for convenience purchases (purchases you now make with checks or cash) like groceries, fast food, gasoline, taxes, postage, etc.
The future for debit cards is mind-boggling. Right now less than 20% of all consumer payments are made on bank credit cards, roughly $400 billion. Potentially debit cards could displace in excess of $1 trillion dollars in the U.S. alone.
Debit card usage will undoubtedly grow much faster than credit cards or ATM cards. It took consumers about ten years to adjust to credit cards and about five years to warm up to ATM machines. With more than 100 million Americans expected to carry debit cards by the end of next year, debit could be mainstream within two to three years.
The summer vacation season is in full swing (82% of Americans will take road trips and 15% will fly) and MasterCard has offered some hot, smart credit tips for vacationers:
1. Make sure you plan a budget before you embark on your journey and stay within your budget by monitoring your vacation expenses with receipts. Use your monthly statement to track and itemize expenses upon your return. 2. Call your credit card issuer's customer service number and ask your issuer to review your credit card travel benefits with you before you go on vacation. All issuers have toll-free, 24-hour credit card emergency telephone numbers. Make sure you carry this number with you when you travel, in a separate location from you credit cards, and call it immediately to report a lost or stolen card. Your liability will not exceed $50.
3. Ask your credit card issuer if you are covered for misplaced or stolen luggage or other services such as emergency legal aid or access to pre-trip information. Also before you leave, check on additional insurance coverage if you plan to pay for a rental car with a credit card. Many card issuers provide rental insurance covering collision and loss or damage up to the full value of the car. Personal accident insurance and personal effects coverage may also be available.
4. Carry photocopies of your passport, credit cards, driver's license, tickets and credit card customer service number with you to provide proof of identification and a list of important numbers in the event originals are lost or stolen. Store photocopies in you hotel safe. Also, wrap a rubber band around your wallet to create friction if "lifted". This will alert you to a pickpocket attempt.
5. Pack your credit card in lieu of large amounts of cash. If credit cards are lost or stolen, they can usually be replaced the next day (some issuers will even provide you with an emergency cash advance of up to $1,000 until your replacement card arrives). Lost or stolen cash may never be replaced.
6. In the event a company goes bankrupt after you have purchased travel-related services, but before you take your vacation, credit cards protect you by providing refunds or account credits. No such protection is available if you purchase items, such as airline tickets, with cash or a check.
7. Ensure your accommodations are reserved during peak travel season when rooms are at a premium. Hold hotel/motel rooms with a credit card number.
8. Pay for emergency roadside assistance and repairs with a credit card. Many issuers offer towing, jump-starting and fuel delivery assistance programs.
9. Use your credit card to pay for medical emergencies that occur while you're traveling. This will ensure large doctor or hospital bills will not drain your vacation cash reserve. Some issuers, such as those offering medical assistance benefits, provide traveling cardholders with doctor/hospital referrals, medical monitoring and medical transfer, evacuation and repatriation arrangements.
10. Access cash at thousands of automated teller machines (ATMs) throughout the world that display your credit card's network symbol. Immediate, global access to your money is simple: insert your card and enter your personal identification number (PIN). For your own safety, never write your PIN on the card's signature panel.
