Is Your Wallet Full of Plastic Money? In today’s world t here are a lot of plastic money options. While they may all look similar in appearance in reality there is considerable difference. How is the consumer to know?
First of all, is it a MasterCard or a Visa? I am amazed at how often I am asked this question. Anyone who deals with finances should simply know by the number of the card they are given. It goes like this:
– When the number starts with a three (3): it is an American Express card.
– When the number starts with a four (4): it is a Visa card.
– When the number starts with a five (5): it is a MasterCard.
– When the number starts with a six (6): it is a Discover card.
While that is convenient and fun to know, it is not going to make or break your
bank account but what happens at the checkout counter could- Debit or Credit? Which should you pick? And what happens when you do?
Depending on which you pick your transaction is handled very differently behind the scenes even when the money comes out of the exact same bank account. We will keep it simple but let’s delve deeper into this difference to help us decide which we should be choosing.
DEBIT is the favorite for the merchant. Select DEBIT and you will need to enter your PIN. This authorizes your bank to deduct the funds immediately from your bank account. If they’re unavailable, the bank has the option—depending on your insufficient funds agreement with them—to pay the charge and then hit you with overdraft fees or if you are luckier, decline the charge. DEBIT will result in a lower merchant fee for this transaction to your retailer but YOU will have less options should a dispute result in regards to this purchase.
CREDIT offers you as the consumer more security protection. The CREDIT transaction requires a signature, and is processed by the credit card company. The funds usually are processed at the end of the day by the merchant and may or may not be immediately deducted from your bank account. These transactions are processed typically by MasterCard and Visa. This results in higher merchant processing fees which may be passed on to you as the consumer.
In most cases, credit cards offer much greater protection in most cases for those whose cards are lost or stolen. The Fair Credit Billing Act allows credit card users more options when dispute arises for unauthorized purchases or purchases of goods that are damaged or otherwise problematic. As long as you as the consumer reports the loss or theft of a card in a timely fashion, your maximum liability is typically $50. While debit card customers now have The Electronic Funds Transfer Act for similar protection when the customer reports the loss within 48 hours of discovery. After the 48 hour period the liability for the consumer is raised to $500 and after 60 days there is no limit.
Fraudulent charges that are made in your name are not assessed to credit card holders and they find the law is more forgiving while some debit card providers offer zero-liability protection.
This isn’t universal though so you should check with your bank to learn your exact situation for your specific cards.
So do you want to give up your consumer rights at the checkout counter? If not, you may want to follow the advise I give my children – ALWAYS SAY CREDIT!!
Stay tuned for more business insight…
Embrace your journey…
Business Strategist – “The Business Information Station”