Check cashing stores are feeling the bite as more and more of their customers are opting for prepaid debit cards to do their banking. For years the only financial service available to a large segment of the population that is not serviced by traditional banks, was to pay between 1.5% to a whopping 10% of their check simply to have it cashed. Now a new, more convenient and less expensive option is available thanks to the prepaid debit card.
Enter the prepaid debit card. Both Mastercard and Visa have prepaid debit programs that have significant advantages over the traditional check cashing shop. Probably the biggest advantage is not having to carry around cash. If you have just cashed your weekly or bi-weekly paycheck, what do you do with the cash? Carry it on you? Hide it someplace at home?
People who had relied on check cashing services had to physically go to the store to have their checks cashed. The debit card can be reloaded via direct deposit or through a broad network of retail outlets like Wetern Union making the weekly or bi-weekly trek to the cash checking shop unnecessary. With the debit card the consumer has greater control on how his money is both deposited and spent.
The debit card is not a credit card. The card is simply an electronic wallet for your own money. No credit check is made at the time of application and virtually everybody who applies for a card is accepted.
It is much safer to carry the debit card rather than cash, however there is a downside to the amount of liability you might be exposed to if you lose your card. Unlike credit cards, you only have two days to report the loss or fraudulant use of your card. If you report within that time frame you are liable for the first $50. If you take longer than 2 days, your liability jumps to $500. If you wait longer than 60 days you are responsible for the entire loss.
So how is this different from credit card liability. The big difference is we are talking about someone taking money out of your bank account, not your account with a credit card. The bank can take up to 10 days to investigate and you are out that loss for at least that amount of time. Many of the debit card issuers offer free online statements. It would be wise to check them daily to insure your card has not been compromised.
So what do these cards cost? There is no one answer. All of them make money off of fees, both from the consumer and also off merchants who honor the card in their store. Some cards may encourage consumers to use their card like a credit card which creates a “signature purchase”. While it is becoming rarer, there are still major chains that do not honor debit cards but will process them as a credit card if it’s issued by Visa or Mastercard. This has no impact on the consumer, but the card issuer can charge substantially more to the merchant for processing a signature purchase. If you are looking at getting a debit card make sure you fully understand the terms and conditions an fee schedule.
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