If you have followed our strategies in the previous installment of our 4-part credit card series, you might have already received an approval letter from your credit card issuer. However, if you were turned down or if you prefer not to risk getting into debt, there are other options available to you. There are other cards, in addition to credit cards, that can also provide you with great flexibility and convenience for a variety of usage situations. These cards include charge cards, debit cards, ATM cards, check cards, and store-value or "e-cash" cards. Read on to see which one of these cards may be the best fit for your situation.

Understanding Your Options

Charge cards work like credit cards except that they don't not have an associated interest rate because you agree to pay the full amount of the charges due each month. The card issuer usually charges you an annual fee for the privilege and convenience of using the cards. The American Express Card for Students (the green Card) is an example of a charge card.

Debit cards look just like credit cards and can be used in many places where a credit card is used. In addition to the issuing bank�s brand, you will also see either a Visa or MasterCard logo on the front of the card. The difference between a credit card and a debit card is that a debit card uses the money in your bank or investment account to pay for purchases. The payment amount is transferred from your account to the merchant's account the same day - you do not have a "float" of a few days between the time of purchase and payment collection. An advantage of a debit card is that you don�t get into debt because you only spend money you have available in your bank account. A big disadvantage is that if there are any fraudulent transactions on your account, you will not have access to your money, the amount involved in the fraudulent transactions, until your bank completes its investigation. Although most banks work quickly to clear up this kind of problems, it may take several months. ATM cards are used to get cash and complete other transactions at a bank machine or automatic teller machine (ATM). An ATM card give you convenience and flexibility of conducting simple banking transitions such cash withdrawals, deposits, funds transfers, and balance inquiries 24 hours a day. You can usually get an ATM card simply by opening a checking account at a major bank. Be sure to select a bank that has a large nationwide ATM network, so you can easily find an ATM close to you when traveling, and avoid paying surcharges for using out-of-network ATMs.

Check cards or ATM/debit combo cards are increasingly issued by major banks instead of ATM cards. You can use the check cards to access cash from ATMs or to make purchases at merchants capable of accepting debit cards. Like all debit cards, the money for these purchases is transferred out of your account within that day's business cycle. Be sure to know exactly the types of cards you have so you can use them appropriately. If you are not sure, check with the issuing bank.

Store-value or "e-cash" cards look like credit cards but are actually prepaid cards with an embedded microchip. Due to the smartness of the microchip, this type of card is also commonly known as smart card. This is an emerging payment vehicle and is used as substitute for cash to pay for small purchases such as for parking meters, phone calls, vending machines, and copy machines. Once the value on the card is used up, additional value can be transferred from your bank account or credit card onto the e-cash card using a special smart card-enabled ATM or an e-cash reloading station. Treat a store-value card as cash. If you lose it, you lose the cash value on the card. Some smart cards allow you to lock the value on the card with a PIN, so other can�t use it. This security feature encourages the return of lost store-value card to its owner since it provides no benefit to the finder, at least in theory.

Card Type Comparison:

Usage pattern
Credit: Use typically for larger purchases
Charge: Use like a credit card
Debit: Use as a check substitute to pay for everyday items such as gasoline, groceries, and meals
ATM: Use for cash withdrawals, deposits, balance inquiries, fund transfers
Store Value: Use as a substitute for coins when making small purchases from vending, laundry, or copy machines, or when paying at a parking meter . . .


Access to cash
Credit: Using cash advance feature
Charge: Using cash advance feature
Debit: Direct access to bank account for purchases or cash withdrawal
ATM: Cash withdrawal from bank account
Store Value: Only to transfer value from your bank account onto the card


Finance charge
Credit: Yes, APR varies
Charge: No, payment in full each month
Debit: No, unless overdrawn available cash in the account
ATM: No, surcharge may apply when using out-of-network ATMs
Store Value: No


Card acceptance
Credit: 22+ million merchants worldwide
Charge: Widely accepted, but slightly less than Visa & MC brands
Debit: Same as credit card
ATM: Only at ATMs, and some gas stations
Store Value: Only at merchants equipped with smart card terminals


Payment for purchases
Credit: Partial or full payment due shortly after receiving your monthly statement
Charge: Payment in full due each month after receiving statement
Debit: The day of the transaction is conducted
ATM: Immediately
Store Value: Money is transferred from the bank account to the card, and the value of the purchases are deducted from the balance on the card


Liability for unauthorized uses
Credit: Maximum $50 if reported in a timely manner
Charge: Same as credit cards
Debit: $0 if reported within 2 business days, maximum $50
ATM: Maximum $50 if reported within 2 business days, and higher after that
Store Value: It is just like cash. You lose the balance on the card if you lose the card

Know Your Rights Now the good stuff! Believe it or not, you do have rights & privileges as a card applicant or holder. Here are some of the principal federal laws that protect you:

• The Equal Credit Opportunity Act prohibits discrimination against an applicant for credit because of age, sex, marital status, religion, race, color, national origin or receipt of public assistance. If you have been denied credit, the law requires notification of the denial and the specific reasons for it in writing.
• The Fair Credit and Charge Card Disclosure Act requires disclosure of the APRs, annual fees and grace periods in applications and pre-approved offers for credit cards. It also requires that consumers must be notified of annual fees and credit insurance terms.
• The Fair Credit Billing Act establishes procedures for the prompt correction of errors and protects a consumer's credit rating when a dispute is being settled.
• The Fair Credit Reporting Act establishes procedures for correcting mistakes on a person's credit report and requires credit reports only be provided for legitimate business needs and that the confidentiality of the reports is maintained.
• The Fair Debt Collection Practices Act is designed to eliminate abusive, deceptive and unfair debt collection practices.
• The Truth in Lending Act requires disclosure of the APR and certain other costs and terms of credit so consumers can compare the prices of credit from different sources. It also limits liability on lost or stolen credit cards.

Use Your Options Now that we open up more options for you, make sure you use them to your advantage. Knowing how to choose the right cards will help you take advantage of the benefits each offers. Each works differently and has its own term, fees, and protections if your card is lost or stolen. Begin by thinking about how you are likely to use cash or credit and then comparing the types of cards that best match your needs. Some of them offer excellent value, while others may cost more to use but provide special services you may find helpful. Come back to learn how you can protect yourself from credit card fraud in the next installment.