Not so long ago, when you stood in line at a store, you heard the question, "Cash, check or credit?" Now you often hear, "Credit or debit?"
The use of debit cards in lieu of cash or checks has become a broad trend for all areas in the consumer world. According to Robert Steele, vice president of deposit services for Home Savings & Loan in Youngstown, there has been a substantial increase in the use of debit cards over the past two years, and a 5 percent decrease in consumers writing checks every year in recent years to correlate with it. Marc Mucroski, manager of the First Choice Community Credit Union of Niles agrees; he puts the numbers at about 25 percent in the increased use of debit cards in recent years. Mucroski noted that a good number of younger people seem to prefer the debit card for its convenience, citing that it meant less paper and less hassle.
Many more businesses are now accepting credit or debit cards, as their consumers are changing their habits. While credit card usage has remained about the same, debit cards now play a substantial role in how people manage their money.
"Looking into the future, I think you're just going to see it grow and grow," Steele said.
But how does it all really work?
According to Steele, there are actually two sides to the debit card - one side literally works as a debit, drawing money directly from your account through the debit's network. This is the side you use when you withdraw from an ATM, or punch in your PIN number at the store counter. The other side is the "credit" side, which carries the name of a major credit card company like Visa or Mastercard. This allows the card to be run through the brand name's network, and allows it to be accepted just like a credit card at the counter
What's the difference?
For one, the debit side typically works faster; the time from when you make your transaction to when that transaction is reflected in your account balance is less. This is particularly useful for money management and in keeping a running tally of how much you have available in your account at any one time.
The credit side works more slowly. Instead of processing through the debit network, it's processed through the brand's network, which may take significantly longer to show up in your account balance. Another thing Steele notes is that some merchants wait to send several customer credit charges through to that system at once, in batch transactions, which may delay the updated account balance even further.
There are other things to take into consideration when choosing which "side" of the card to use, as well: Fees.
Some institutions charge a fee for using the debit side of the card, similar to the fees attached to using an ATM that doesn't belong to your bank. When you use the credit side of the card, this fee isn't charged to you.
However, businesses are charged significantly less when they process debit purchases versus credit purchases; some big box retailers automatically push customers to use the debit side, rather than offering to run it through the credit side, for this specific reason.
With all of these terms, how do you choose which side of your card to use, if you choose to go cashless at all?
Steele advocates a common sense approach. His tips for managing your money, whether you use the card at the counter or withdraw from an ATM, are to always keep track of your balance. He also suggests researching your financial institution, from whether or not they charge fees for using the debit side of your card at the counter, to the ATMs they use. Some machines are online, meaning that they remove the money immediately from your account balance. Some machines are offline and only send transactions once a day. When you do use the ATM, you should always take a balance inquiry out before you remove money from your account.
So, now that you know how it works: Cashless or no?
The convenience of the debit card is a plus - be it shopping at reputable places online, or in most businesses offline, there's no time wasted. The downside is that it can become very easy to lose track of how much money you spend if your vigilance slips. With cash, you can only spend what you have in your hand at that time.
There are safety issues with either choice: Cash lost is almost never regained, whereas consumers do have hope of reclaiming money lost in debit fraud. On the other hand, you can only lose however much cash you have on hand - with a debit loss, you could find your account drained, and even with a guarantee, it could take a good deal of foot-work to get it back.
In the end, only the consumer can decide which way to go.
Either way, Steele has one piece of advice that applies to both cash or debit: "Be cautious."