Released: July 26, 2007

Get smart about debit cards

Source: Joan Goldwasser and Amy Esbenshade Hebert, Kiplinger's Personal Finance

Debit cards are fast becoming U.S. consumers’ plastic of choice. Bank customers used their cards more than 26 billion times last year to spend more than $1 trillion, says Nilson Report publisher David Robertson. Debit-card use now accounts for two-thirds of Visa’s total transactions and half of its dollar volume.

With more than 60% of those transactions less than $25, it’s clear that shoppers see the cards as a convenient substitute for cash and checks. And many banks encourage debit-card use by offering rewards points. But the cards also raise concerns about security. To minimize risk, be smart about how you use your card.

PIN or pen? Debit-card users are caught in the crossfire between merchants and card companies. Merchants want you to punch in a personal identification number because processing PIN-based transactions costs them less in fees. Meanwhile, Visa and MasterCard prefer that you sign for transactions, which are then processed through their networks.

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