If you discover false transactions on your credit card, you're protected under the law, right? But what about your debit card? There's nothing required in current regulations to forbid your bank from charging you NSF fees if a thief steals your debit card. Your bank is only required to restore funds -- they're not required to waive any bounced check charges. Shame on the banks.
Last month, Flexo posted on his blog Consumerism Commentary an interview with a Visa representative regarding debit cards. His first two questions concerned the issues of fradulent charges and consumer protections. The Visa representative mentioned its Zero Liability policy. One important note regarding this policy is that you only qualify if you sign for purchases (choose the credit option rather than debit). Signature-based purchases using a Visa debit card are processed over Visa's network, but PIN-based transactions may not be.
Flexo just posted some additional Q&A's from Visa that deal with other issues for comparing the trade-offs between debit cards, credit cards and cash. His 5th question dealt with debit card rewards. Some banks and credit unions have started various credit-card-like reward programs for their debit cards. In these programs you get some percent back in cash, air miles, etc. for each dollar you spend with the card. Bank of America's Keep the Change Program and Wachovia's Way2Save are a little different but they essentially reward customers for making debit card purchases.
The high yield reward checking account is another type of reward program. What can make this better than the credit-card type of reward program is that it favors savers over spenders. For cash-back credit card rewards, the more you spend, the more you make in rewards. For reward checking accounts, the amount of the rewards depends on your checking account balance instead of how much you spend. You only have to meet the required number of monthly debit card purchases. If you maintain $25,000 in the checking account and meet the requirements for a year, you could potentially make $500 more than what you would have made in a high yield savings account. This assumes that the reward checking account maintains an interest rate 2% higher than your savings account which may be a little optimistic.
Related reward checking posts and resources: