Roanoke Times
Copyright (c) 1995, Landmark Communications, Inc.
DATE: MONDAY, November 21, 1994 TAG: 9411230064
SECTION: BUSINESS PAGE: EX6 EDITION: METRO
SOURCE: MAG POFF STAFF WRITER
DATELINE: LENGTH: Long
They are debit cards, although banks have varying names for them: the Premier Money Card at Crestar, CheckCard at First Union, Central Check at Central Fidelity and MasterMoney at Signet.
Debit cards have been around - quietly - for more than a decade, but now consumers will hear more because most banks are starting to push them hard. That's especially true of Signet, which launched a prime-time television blitz in the Richmond and Baltimore markets Nov.9. That campaign should play soon in Western Virginia.
Debit cards have multiple attributes. They are:
ATM cards. They can be used to access your account at automated teller machines.
Credit cards. They look like a credit card, and debit cards can be used at all of the locations worldwide where Visa and MasterCard are accepted. In fact, merchants can't tell the difference. Since it is tied to a checking account, it's a way some people with poor credit can qualify for a card.
Checks. If you have a debit card, you won't have to carry your checkbook. When that slip gets to the bank, the amount of the charge will be deducted immediately from your checking account.
Cash. Why risk carrying cash when you have one card that will access the ATM as well as pay for items you buy?
Unlike a credit card, however, you can have a debit card only from a bank where you have a checking account. So, unlike credit cards - which many consumers have by the dozen, you can't have multiple debit cards unless you have more than one checking account.
If it sounds good, consider that the cards have some drawbacks.
Except for Signet, which is launching its newly named cards without a fee for a limited period, you pay a fee for the convenience, just as you would for a credit card. First Union, for instance, charges $1.50 a month, or $18 a year. Other banks may have monthly fees or usage fees.
Unlike a credit card, you won't get the float, or free use of money or credit, on recent purchases. There is no bill at the end of the month with a 25-day grace period to pay.
John Yarley, CheckCard marketing manager for First Union, said the debit card is intended to replace a check rather than a credit card. He said the average time it takes to post a charge to an account is 2.4 days, about the same it takes for a check to be posted against an account.
First Union sees its cards used at service stations, discount and department stores, restaurants and hardware stores, in that order. One customer even used it to buy a car. The average First Union customer uses the card eight times a month.
Yarley said he and his wife carry the card instead of their checkbook. They get no bills at the end of the month because the money comes directly out of their checking account. Their checking statement shows the date, location and amount of the debit card expenses, just as it would for a credit card.
Conversely, the Yarleys use a credit card for major purchases so that they avoid drawing down their bank account all at once. Those who pay their credit card account in full each month may not need a debit card, Yarley said, "if they want to play the float."
Mike Woodward, a vice president at Crestar Bank, said debit cards are good for people who don't like credit cards, such as those who fear being in debt. They are deducting directly from their bank account just as if they had written a check.
The biggest problem, Woodward said, is that some people forget to record the deduction in their checkbook, just as some do with ATM withdrawals.
Woodward said debit cards are becoming very popular, but they can't be compared to credit cards. Debit cards are "a different product, a different animal, a different use."
The Visa logo may be on the card, Woodward said, but the product is a check without the problems of identification.
John Nania, who handles the product for Central Fidelity Bank, said debit cards are gaining in popularity even though they haven't been heavily promoted, especially in Western Virginia.
The benefit, Nania said, is convenience.
Since the merchant accepts the Visa or MasterCard logo, the customer avoids the problems of writing a check, Nania explained.
Debit cards, Nania said, "appeal to people who don't want statements or interest. You pay as you go."
The cards, he said, "add a sense of control" to people who have a problem with credit cards. But he added that a lot of people carry both. Nania uses the credit card for large purchases such as appliances, but the debit card for routine shopping.
"It's another way to manage your money," Nania said.
Signet, which has had about 30,000 debit card customers since the mid-1980s, just last week completed mailing 200,000 of its new MasterMoney card, developed with MasterCard.
Right now it has no fee, said Brian Carrier, Signet's retail product development manager, and it is tied to a program of discounts from some mall merchants - just in time for holiday shopping. Signet promotes it as a new type of ATM card "that works like a check without the hassle."
by CNB