Debit vs. Credit Cards Flashcards
What can you do with both debit and credit cards?
Credit cards and debit cards both enable you to make purchases online, over the phone, or in person at the point of sale.
What are the 2 Credit Cards Only features?
- Financing Purchases
2. Balance Transfers
What are the 3 Debit Cards Only features?
- ATM Withdrawals
- Cash Back at merchant register
- Small Dollar Transactions under $10.00
What are the 4 reasons you should pick a Debit Card at the register?
- You want to withdraw cash
- You want to avoid debt
- Small-dollar purchases
- Shopping at merchants that only take debit cards (Costco or Aldi)
What are the 5 reasons you should pick a Credit Card at the register?
- Improve credit rating
- Finance a purchase or transfer a balance
- Earn rewards on purchases
- Guarantee of $0 fraud liability
- Fringe benefits (rental car and travel insurance, price protections)
What are the 4 transaction types you should use a Debit Card for?
- Small-dollar transactions
- Cash-only transactions
- Cashback at the register
- Person-to-person payments
What are the 7 transaction types you should use a Credit Card for?
- Online purchases (fraud protection)
- Gas (funds hold)
- Car rentals (rental insurance and funds hold)
- Hotel reservations (rewards, travel insurance, and funds hold)
- Airline tickets (rewards and travel perks)
- Restaurants (fraud protection)
- Travel transactions (fraud protection and no foreign transaction fee credit card)
What are the 4 major provisions of the Durbin Amendment?
- Merchants Can Now Set Credit Minimums:
Merchants are now free to implement minimum purchase amounts as high as $10 for credit card transactions in order to avoid losing money on small transactions. - Government Agencies & Universities Can Set Credit Maximums:
Government agencies and institutions of higher education are entitled to implement maximum purchase amounts for credit card transactions. This is to avoid allowing people to shift significant payment liability – such as what might result from taxes or tuition – to an unsecured payment vehicle. - No Surcharges, But Discounts are Allowed:
Merchants can’t charge you more if you use a certain payment method, but they are allowed to give discounts to customers who use their payment (i.e. credit card, debit card, cash, etc.) of choice. They cannot, however, provide larger discounts to one card network versus another. This affords merchants more control in steering customers toward using the type of payment method that is least costly to them. - Fed Interchange Fee Regulation:
The Durbin Amendment conferred upon the Federal Reserve the right to ensure that debit card interchange fees are “reasonable and proportional” to the costs that banks incur in processing these transactions. This resulted in the Fed capping debit card swipe fees at roughly $0.21.
What are Interchange Fees?
The Durbin Amendment limited the so-called “swipe” fees that banks can charge merchants for debit card purchases, thus costing big banks an estimated $8.4 billion in annual revenue, necessitating changes in the fee structure of checking accounts and essentially killing debit card rewards.Interestingly enough, such dynamics have also led banks to promote signature debit card purchases with more favorable fraud liability protections, as they provide more profitable interchange fees than the otherwise more secure PIN transactions.
What are sign For Debit Card Transactions?
Card networks offer blanket $0 liability guarantees for unauthorized transactions “verified” by signature, while providing far spottier coverage for PIN transactions. One reason for this is that signature debit card transactions carry higher interchange fees than PIN transactions and are thus more profitable for credit card companies.
What are Interchange Earnings?
Interchange Earnings: Despite regulations limiting these fees, card issuers still pull in $20 billion in annual interchange fees.
What is Chip and Signature?
Most “smart” credit and debit cards now being issued use chip-and-signature verification rather than the more secure chip-and-PIN, as the former provides for an easier transition from our current magnetic-stripe-based payments system.
What is Apple Pay and Google Wallet?
Will pass through purchases to both credit cards and debit cards.
What is the market share of Debit card transactions?
Debit card transactions account for 41% of the debit-credit payments market.
What is the combined annual spending on U.S. credit cards and debit cards?
$4 Trillion
