ATM/Debit Cards

1. ATM/Debit Cards Unit 1: Lesson 2

2. Introduction • For many Americans, debit cards are quickly replacing personal checks as a means of making payments. Students should be able to recognize the difference between a debit card, ATM card, and a credit card. • Cards used exclusively for an automated teller machine, or ATM, are being used less frequently today because many merchants will not accept them. An ATM card does not have a visible credit card logo.

3. Introduction • Most debit cards, on the other hand, can be used with merchants as well as an ATM machine. In the future, debit cards may replace checks because they are easier to use and recordkeeping is similar: debits must be subtracted from a bank account. Students will learn the advantages and disadvantages of debit cards and practice the type of recordkeeping they will use at JA Finance Park.

4. Key Terms • ATM • A card that allows basic financial services from an automated teller machine. • Debit • The amount deducted from a bank account. • Debit Card • A card that looks like a credit card but operates like cash; money is immediately subtracted from the user’s bank account.

5. A Debit Card View of an ATM/Debit Card • Operates like check or cash. The transaction amount immediately comes out of your account with no interest charge. • Can be used wherever credit cards are accepted (card logo will be displayed). • Can be attached to a checking or savings account, and sometimes both. • Can be used to withdraw cash at ATMs or when making a purchase using the card’s PIN (personal identification number).

6. A Debit Card View of an ATM/Debit Card • Is easier to carry and more readily accepted than a check. This is especially useful when traveling out of town where your check might not be taken. • Usually has no annual fee; however, be careful where you use your card, because there may be fees, especially when withdrawing cash.

7. A Debit Card View of an ATM/Debit Card • Can be a problem if an error is made. When making error corrections, many retailers will do a “void transaction,” which cancels the sale and prevents it from being processed. This system works fine with credit cards, but with debit card transactions, once an approval code is obtained, your money is held. A “voided transaction” will not be removed until released by the retailer, which can sometimes take up to 30 days! That means those funds may be out of your reach for some time.

8. A Debit Card View of an ATM/Debit Card • Is not reported to credit bureaus and, therefore, is not a way to build credit history. • Can cause a financial fiasco if it falls into the wrong hands because the amount comes straight out of your account. If a thief gets your card – or even just the account number – he can clean out your account along with any overdraft protection.

9. An ATM Card View of an ATM/Debit Card • Can be used to withdraw cash at ATMs using the card’s PIN. The withdrawal amount immediately comes out of your account with no interest charge. • Can be attached to a checking or savings account, and sometimes both.

10. Question Session • Which card(s) can be used to make purchases? • Debit Card • Which card(s) can be used to withdraw cash? • ATM card • Debit Card • What does debit mean? • An amount deducted from a bank account

11. Word Map – Page 37 • Credit Cards • Buy Now, Pay Later • Debit Cards • Buy Now, Pay Now • ATM • Automatic Teller Machine • Debit • Subtract

12. Debit Cards – Page 6 • A debit card is just another name for a credit card. • False • A debit card is similar to a credit card because both are used as a method to buy now, pay now. • False • Use of a debit card takes money directly from a person’s bank account. • True

13. Debit Cards – Page 6 4. Someone can make a purchase with a debit card even if there is not enough money in his/her bank account. • False 5. Using a debit card is the same as securing a loan. • False 6. There are no advantages to using a debit card instead of a check. • False

14. Debit Cards – Page 6 7. Businesses are more likely to accept a debit card than a check. • True 8. Even if a debit card is not stolen, a thief can still use it to make purchases. • True 9. It’s important to keep track of debit card purchases so you know how much money is in your account. • True

15. Page 7 – Debit Cards: Beyond Cash and Checks • Debit cards, also known as check cards or ATM (automated teller machine) cards. A debit card operates like cash or a personal check. When you use a debit card, you buy now and pay now. Debit means subtract. As a rule, debit cards allow you to spend only what is in your bank account. Your purchase is instantly deducted from your checking or savings account.

16. Page 7 – Debit Cards: Beyond Cash and Checks • Debit cards are accepted at many businesses, such as grocery stores, retail stores, gas stations, and restaurants. You can use a debit card anywhere merchants display your card’s brand name. Using a debit card gives you an alternative to carrying a checkbook or cash. Some stores might be more likely to accept a debit card than your personal check because the payment is approved and credited to the merchant immediately.

17. Page 7 – Debit Cards: Beyond Cash and Checks • When you use a debit card, you are subtracting your money from your own bank account. A credit card, on the other hand, involves using credit. A debit card us not the same as a credit card. Credit is money given to you by a bank or other financial institution. It is a loan. You can use the credit card with the understanding that you will repay the money you have used, plus interest and any finance charges, if you do not pay debit in full each month.

18. Page 7 – Debit Cards: Beyond Cash and Checks • What you should know about debit cards: • Obtaining a debit card is often easier than obtaining a credit card. • Using a debit card instead of writing checks saves you from showing identification or giving out personal information. • Using a debit card frees you from carrying cash, traveler’s checks, or a checkbook. • Debit cards might be more readily accepted than checks by merchants.

19. Page 7 – Debit Cards: Beyond Cash and Checks • What you should know about debit cards: • The debit card is a pay-now product with no grace period for payments. • Use of a debit card may not offer the same protection as a credit card for items you purchase that are not delivered, are defective, or were misrepresented. • Returning goods or canceling services purchased with a debit card is handled the same as if you made the purchase with cash or a check.

20. Page 7 – Debit Cards: Beyond Cash and Checks • What you should know about debit cards: • With a debit card, you are using your own money. It is estimated that two-thirds of American households now use debit cards. Debit cards will continue to rival cash and checks as a form of payment as consumers continue to look for convenient ways to make purchases.

21. $634.51 + 931.72 3/20 Deposit - Paycheck + 931.72 $1,566.23 1320 3/21 Water Company -65.39 -65.39 $1,500.84 1321 3/21 Power Company -46.50 -46.50 $1,454.34 1322 3/22 Central Bank -737.52 -737.52 $716.82 Debit -298.53 Mainland’s Furniture 3/25 -298.53 $418.29 -22.52 Debit Corner Market -22.52 3/26 $395.77 3/30 Dividend + 56.23 + 56.23 $452.00

22. $452.00 + 737.52 3/30 VOID #1322 + 737.52 $1,189.52 1323 3/30 Central Bank -773.25 -773.25 $416.27 Debit 3/31 Withdrawal -20.00 -20.00 $396.27 Debit 4/3 Pacific Hardware -18.99 -18.99 $377.28 1324 -246.45 State Ranch - Insurance 4/6 -246.45 $130.83

23. Homework • Complete Scenario & Register II • Complete Scenario & Register III