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The ins and outs of debit cards

Quick. What do you call that card in your wallet that lets you withdraw cash from an ATM and make purchases without using credit?

The answer is a debit card. But if you said a check card or an enhanced ATM card or even an express checking card, you could be right as well. Different banks call debit cards different things.

"There's quite a vocabulary out there," says E. Thomas Garman, author of more than 30 books on personal finance.

All the different names only add to the confusion swirling about these convenient payment cards. When it comes to debit cards, lots of people have an awful lot to learn.

How they work
Let's start at square one with how a debit card works. When you pay with a debit card, the payment is pulled directly from your bank account. There's no pay later option with debit cards. With a debit card you pay now.

"You really have to pay attention to your spending," Garman says. "A debit card is like a live checkbook."

When using a debit card, you can use a personal identification number or a signature. Both remove money from your account immediately. Many banks now offer rewards for debit card use, but most award points only on signature purchases.

Many debit cards also carry the Visa or MasterCard logo. These cards are accepted anywhere Visa and MasterCard are accepted. They work just like other debit cards, in that the money is deducted from your bank account immediately.

Some banks offer both types of debit cards. Other banks place both kinds of debit functions on the same card.

Let's say your debit card lets you pay by PIN or by signature. When you swipe your card at the checkout line, you'll be asked if you want to pay by debit or credit. If you hit "debit," you'll need to input your PIN number. If you hit "credit," you'll need to sign the sales slip.

Don't know what kind of debit card you have? Call your bank and ask.

Watch out for fees
Don't forget to ask about fees, as well. Some banks charge debit card customers monthly fees. Other banks charge fees on each debit card transaction. Fees vary from bank to bank and from checking account to checking account within the same bank.

"There could be a variety of fees," says Susan Grant, vice president of public policy at the National Consumers League.

Next: "World travelers should also take note."
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