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Understanding Debit Cards: A Comprehensive Guide

Welcome to O1ne Mortgage! If you have any mortgage service needs, call us at 213-732-3074. In this article, we will explore the ins and outs of debit cards, including how they work, common fees, and how they compare to credit cards.

How Do Debit Cards Work?

A debit card is linked to a checking or money market account, providing direct access to your funds. You can use it for:

• Making purchases online or in person
• Withdrawing money from ATMs
• Paying bills
• Transferring money to other accounts
• Sending money via peer-to-peer services

Prepaid debit cards function similarly but are linked to prepaid accounts instead of checking accounts.

Common Debit Card Fees

While some banks offer fee-free debit cards, others may charge for certain transactions. Common fees include:

• Monthly maintenance fee: Some accounts charge a monthly fee, which may be waived under certain conditions.
• ATM fee: Using out-of-network ATMs can incur fees from both your bank and the ATM owner.
• Insufficient funds fee: If a transaction exceeds your account balance, you may be charged an NSF fee.
• Overdraft fee: If your bank covers a transaction that exceeds your balance, an overdraft fee may apply.
• Foreign transaction fee: Using your debit card abroad may result in a fee, typically 1% to 3% of the transaction amount.
• Cash load fee: Loading cash onto prepaid accounts at retail stores may incur a fee.

Can You Build Credit With a Debit Card?

Traditional debit cards do not help build credit as they only allow access to existing funds. However, some newer debit cards offer credit-building features. For example, the Experian Smart Money™ Digital Checking Account & Debit Card links to Experian Boost®ø, helping you build credit with eligible bill payments.

How to Get a Debit Card

To obtain a debit card, open a checking or money market account. You can usually do this online, by phone, or in person. Required information typically includes:

• Full name
• Social Security number or ITIN
• Date of birth
• Street address
• Email address
• Phone number
• Government-issued ID

After opening the account, you will receive your debit card by mail within a week or two. Follow the activation instructions to start using it.

How Debit Card Fraud Protection Works

If your debit card is stolen, the Electronic Funds Transfer Act limits your liability based on when you report the loss:

• Before unauthorized charges: $0
• Within two business days: $50
• More than two business days but fewer than 60 days: $500
• More than 60 days: Full amount stolen

Many banks offer zero-liability fraud protection, even if you don’t report the theft immediately.

Debit Cards vs. Credit Cards

While debit and credit cards look similar, they function differently:

• Security: Credit cards often offer better fraud protection.
• Credit Building: Credit cards are more effective for building credit history.
• Debt Potential: Credit cards allow spending beyond your bank balance, which can lead to debt.
• Eligibility Requirements: Credit cards typically require a credit check and sufficient income.
• Benefits: Credit cards often offer rewards and bonuses not available with debit cards.

Frequently Asked Questions

What Is an ATM Card?

An ATM card is used primarily for withdrawing cash and checking account balances at ATMs. It is often linked to savings accounts that do not come with a debit card.

Is It Better to Use Credit or Debit?

The choice between credit and debit depends on your financial habits and needs. Credit cards offer rewards and credit-building benefits but can lead to debt if not managed responsibly. Debit cards help avoid debt but offer fewer benefits.

Compare Debit Cards to Find the Right One for You

When choosing a debit card, compare options from various banks. Consider fees, rewards, and other features to find the best fit for your needs.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help!

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