In recent years, debit cards have gained in popularity and now rival cash and credit cards as one the most popular forms of payment in the United States. People with debit cards can access cash at automated teller machines (ATM) or make purchases at point of sale (POS) terminals. Some vendors do not accept credit or debit cards, whereas practically all businesses accept cash payments. Consumers and business owners must weigh the advantages and disadvantages of cash and debit cards as forms of payment.
Many historians believe that ancient Mesopotamians invented the first form of currency and centuries later the Egyptians minted the first coins. In the U.S., Congress passed the Coinage Act of 1792 that called for the establishment of the nation's first mint in Philadelphia.
ATM cards first appeared in London in 1967. In 1985 the Supreme Court allowed ATM debit networks to cross state lines. During the 1980s grocery stores began using POS machines and during the 1990s most banks added the Visa logo to ATM debit cards.
U.S. dollar bills are printed in $1, $2, $5, $10, $20, $50 and $100 denominations. Commonly used coins are 1 cent, 5 cent, 10 cent, 25 cent and $1. Other denominations of coins are minted periodically as collectors' items.
Banks issue debit cards with personal and business checking accounts. Visa, Mastercard and American Express sell pre-paid debit gift cards. Many state governments use payroll debit cards to pay unemployment benefits and some companies use the cards to pay employees who do not have bank accounts.
All banks have cutoff times after which any transactions that occur are counted toward the next business day. Cash deposits made before the cutoff time, which is usually 2 p.m. local time, are available for immediate use and deposits after 2 p.m. post the next business day after midnight. Most banks enable customers to enjoy same-day credit for deposits made with debit cards at the ATM until 8 p.m. Cash and debit card withdrawals are generally deducted from accounts at the time they occur.
Business owners who accept debit cards attract a wider range of clients because many people carry little or no cash. People who do not want to carry cash can make POS purchases of up to $5,000.
Business owners who only accept cash do not have to pay fees to the Visa or Mastercard network for transactions. Visa normally assess fees ranging from a few cents to a dollar for every transaction. Consumers who use cash do not have to worry about overdraft fees if they miscalculate their balance.
If an account holder loses a debit card and reports the loss within two business days, federal law limits their liability to $50 for any unauthorized charges. If someone loses cash, banks will not reimburse them. Merchants all over the world on the Visa network accept debit cards. People who carry cash have to pay to change their money whenever they leave the country. If you forget to inform your bank of an overseas trip it may freeze your debit card due to unusual activity, whereas people with cash have no such problems. Most bankers recommend using both forms of payment.
- Exeter University: Origins of Banking and Money
- United States Mint: History of The Mint
- CBS News: Man Who Invented ATM Machine Dies at 84
- Federal Reserve Bank of Kansas City: A Guide to the ATM and Debit Card Industry
- Federal Reserve Bank of Philadelphia: The Evolution of EFT Networks from ATMs to New On-Line Debit Payment Products
- USA Today: Debit or Credit Card? Here are the Pros and Cons