Debit Cards - Put Your Bank In Your Wallet

Prepaid debit cards are making a dent in the check cashing business.  For years check cashing shops have served that part of the financial market that did not have conventional bank accounts.  Pay checks, government checks and personal checks are all cashed for a fee that can range from 1.5% to 10% of the face value of the check.  Typically people paid these rates simply because there are no conventional banks located in their community.

Mastercard and Visa both have prepaid products that offer a number of advantages over check cashing shops.  Gone are the days when the customer had to carry around their entire weekly paycheck in cash.  With the debit card, users can simply go to any ATM that honors Mastercard or Visa and withdraw the amount of cash that they decide they need. 

Gone are the days of standing in line at the check cashing store and leaving with a wad of money in your wallet.  Debit cards can be funded by direct deposit or using one of thousands of retailers that will provide the servie.  The card is the only thing you need to make purchases, pay bills or get cash.

The debit card is not a credit card.  The card is simply an electronic wallet for your own money.  No credit check is made at the time of application and virtually everybody who applies for a card is accepted.

While carrying a debit card is safer than carrying cash, there is a downside when it comes to liability.  Unlike a credit card which limits your liability for fraudulent use or broken or undelivered merchandise to $50, the debit card has stricter requirements.  The card user must report the loss of his card or suspicion that the card has been compromised within 2 days of the event to limit his liability to $50.  If the loss is reported after 2 days the liability jumps to $500.  If the loss is not reported for 60 days, then there is no protection and your account could be wiped out.

The big difference here is if you are disputing a fraudulent credit card charge, you are not out of money.  If you report a fraudulent use of your debit card, the bank could take 10 days to investigate meaning you are out that unauthorized use for over a week.

Debit cards provide a lot more services than a cash checking store and if you are careful in your selection, you will definitely pay less than you did paying for your check to be cashed.  If you are considering a debit card, carefully read the fee schedule and the terms and conditions first.  With some careful shopping you can carry your "bank" around in your pocket and enjoy much more flexibility with your financial dealings.