The Debit Card | Your best friend, or mortal enemy... preventing overdrafts.

Neil Turner Debit Card

The use of debit cards can also be a major source of overdrafts. 

If you go to the store and the machine asks you “Debit” or “Credit” you can use either one as long as your bank card has a Visa/MasterCard logo. 

• If it does not have that logo you may only use “Debit”.  If you select “Debit” the machine will then ask for your pin number. 

• If you select the “credit” option you will not need the pin. You only sign for the purchase or enter your zip code.

~Debit~

If you say “Debit” and use your PIN (Personal Identification Number) the machine will run that purchase request through a Point of Sale Network, (P.O.S.)

The most common POS networks are STAR, Interlink, and Plus. These are the same Networks used to get money from an ATM machine. When you use the card as a POS transaction it will be sent to the bank the same business day in which it is done. 

This means it will show immediately as pending then post that business day. If done before the cut off time on Friday the transaction will be processed Friday night and post Saturday morning. If done on Friday after the cut off time it will go through possessing Monday night and post Tuesday morning.

~Credit~

If you say credit at that same machine and swipe that same debit card with the Visa/MasterCard logo, you will think you did the same thing.

This time it asks for your signature and or zip code. This time the transaction will go through the Visa or MasterCard Network.

This is different in a few ways.

            

Credit is similar in that the transaction will still “Pend” to your account[1]. The credit function of your card is also similar in that both types of transactions come directly from your account.

            

Important note: This is NOT a credit / charge card. When you use a charge card or a credit card you build a balance which you pay back later. And a debit card whether you use “Debit” or “Credit” still comes out of your Checking Account.

But then the rest leads to some confusion...

~Confusion~

When you use the credit key the merchant receives an authorization to use the card.

Whatever the original amount authorized is, will often show as pending to the account. At a grocery store the amount will usually pend correct because the amount authorized was your final amount unless you realize after the card was swiped that there was a problem with the amount. 

However if the amount was wrong (or you authorized it for an amount other than the final amount) than the amount showing as pending will be wrong, it will be the first amount swiped.

Restaurants and Gas stations often pend for wrong amounts, such as for $1 or 20% over your bill. Online or Catalog orders will often show as pending the day of the order, fall off, and then post once the item ships, which can be months later if it is back ordered. 

Some smaller merchants don’t batch daily or get backed up and may not catch a missed receipt for some time. Merchant or machine errors may cause items to pend two or three at a time, usually this corrects itself within a few days. Rental car companies will authorize a deposit which will pend and disappear. 

These are just a few of the more common reasons your card transactions can be just as hard to track as checks.

~Other Issues~

            

These are some examples of the many reasons pending amounts will be different than the final purchase.

Also sometimes a problem with a purchase will cause more than one of the same amount from the same store to pend. These authorizations will typically show as pending for 3-5 business days before posting for the correct amount.

Sometimes when more than one of the same transactions pend, one will post and the others will still pend then disappear a few days later. This is because the merchant must submit an intention to finalize before the item can post.  

If the card was swiped and you then canceled the transaction or voided it than it will still show as pending to your account for 3-5 business days unless that merchant calls and releases the transaction. If the item is right but the merchant is slow to submit the intention to finalize the transaction may show as pending in your balance, disappear after 3-5 business days, and then be added back to your balance and post 2 weeks, 2 months, or a year later. This is why you keep every receipt and write every transaction in your register. 

You cannot know what hasn't posted without a written record.

            

These are problems only when you are calling to check balances and assuming that the balance you hear is your correct balance.

This is not always true.

People who write checks are used to understanding that checks may be outstanding and if they call for the balance they have to account for checks that have been written and not cleared.

People who are younger and don’t write checks aren’t so used to the concept, but they should be. The balance in your register is the only balance you should ever trust.

This may come as a surprise to some:

When you call or go online or check the balance at the ATM, you are not getting your real balance. 

That balance doesn’t mean anything to you unless you understand how it relates to the transactions that have and have not yet cleared. 

The reason you check with the bank is not to check a balance but to check and see which items have cleared and posted and which items have not. 

This allows you to update your register.

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[1] Reflected in available balance but not yet processed.

The Insider

The Insider is a BIG fan of Dave Ramsey:

• Go read/listen/watch Dave Ramsey and he'll teach you how to do it right!

• Listen to The Dave Ramsey Show (HERE)

• Or by his most popular book: (HERE) The Total Money Makeover: Classic Edition: A Proven Plan for Financial Fitness