With no fees for transactions, no debt added to high-interest credit cards, zero-liability fraud protection and new rewards programs, the check card is proving to be a grand slam for consumers.

Check card fees for transactions, whether PIN or signature, have nearly disappeared, according to an exclusive Bankrate survey.

Bankrate researchers surveyed the 10 largest banks and thrifts in 10 top markets and gathered their check card policies and fees. Only seven of the 100 surveyed institutions charge a point-of-sale, or POS, fee for PIN transactions. Five of those charge per transaction and two charge a monthly fee.

Check cards' popularity
Check cards have become nearly universal. Of the 100 banks surveyed, only three do not offer check cards. Of those that do, only two banks -- Bank of the West in San Francisco and Firstrust Savings Bank in Philadelphia -- charge an annual fee to have a card.

Frequency of use per week Source: The Federal Reserve Board

This is very good news for consumers, who have embraced check cards as their preferred purchasing plastic. Since 2003, check cards have been used to make more purchases than credit cards, according to the Federal Reserve.

"The competitive environment for banks demands that they position themselves to the consumer as offering low-cost checking accounts," says Tim Sloane, director of the Debit Advisory Service at Mercator Advisory Group, a payments-industry research firm. "Core to the value proposition for consumers is debit cards. The once-common practice of charging transaction fees on debit cards has disappeared."

Greg McBride, CFA, senior financial analyst at Bankrate, agrees.

"Point-of-sale fees for PIN-based debit card transactions appear to be more myth than reality," says McBride. "Nonetheless, cardholders should always verify the terms with their issuers to avoid being surprised."

Signature transactions fee
For signature transactions, only Wells Fargo has a fee, and that is $1 per month for some customers, regardless of the number of transactions.

"Some customers -- depending on account type and applicable waivers -- are charged a $1 usage each month in which they make a purchase using their check card or their ATM card," says Lisa Westermann, a spokeswoman for Wells Fargo. "The fee is charged for unlimited PIN-based and signature-based point-of-sale transactions and is only charged if either card has been used for point-of-sale purchases during the statement cycle."

The rise of debit card use is attributable to several factors, primarily money management, convenience and security. "Significant awareness was raised about the high interest rates charged by credit cards and the fees for late payments," says Sloane. "Consumers have been educated about the benefits of debit cards. Consumers see it was a way to budget their money more effectively."

In the 2005/2006 Consumer Payments Usage study, the most important things to consumers were convenience and security.

Check card convenience
"The No. 1 reason consumers are using debit cards is convenience," says Nancy Krattli, vice president of consumer debit products at Visa. "They provide convenient money management -- you don't have to carry cash, have exact change and there is no record-keeping because it's on the bank statement."

She says Visa's cardholder surveys indicate that people choose debit for day-to-day transactions such as gas, groceries and drugstore purchases. But increasingly they're using them for smaller-ticket transactions such as fast food, coffee at Starbucks, even parking. "The average ticket has gone down," Krattli notes. "In 2004 the median was $24 and it has come down to $22 now."

A Visa survey from August 2006 showed that 55 percent of check card holders use their check cards for purchases less than $25, and 86 percent cited convenience as their primary reason.

The rise of Gen P
The same survey showed that Generation P (for "Plastic," users 18 to 25 years of age) are driving check-card usage, with 60 percent reporting they use check cards for purchases from digital content and vending machines to parking and newspapers.

In a 2006 presentation to the Philadelphia Federal Reserve, Ronald Congemi, head of First Data, a company that processes credit and debit card transactions, said that check card use now "cuts across all age and income demographics."

Krattli concurs: "The heaviest user skews female, but Generation P is aggressively using it. And seniors are embracing it, too."

Check card rewards on the rise
Another driver in the use of check cards is reward programs. Bankrate's research showed that of the 97 banks that offer debit cards, 47 have reward programs.

"Fourteen of Visa's top 15 issuers have reward cards," says Krattli. "People like to be rewarded for what they do every day."

"Debit is replacing cash and checks," says Krattli. "With cash, you have no features or benefits. With checks, people like to be able to write down the transaction, but it has no benefits. People expect to be rewarded from credit cards and it has migrated to debit, too."

While not as robust as reward programs on credit cards, check card reward programs are still a good thing for those who use debit as an alternative to credit cards, cash or checks.

For example, the Citi ThankYou program awards one point for every $3 using a PIN and one point for every $2 spent for a signature transaction. The ThankYou program with the Citi Diamond Preferred Rewards Card gives five points for every dollar spent at grocery stores, gas stations and drugstores, and one point per dollar at every other type of retailer, including online and phone purchases.

Comerica Bank's World Perks travel rewards program has two tiers: For a $20 annual fee, cardholders earn one mile for every $2 spent, and for $55 annually, they earn one mile per dollar spent.

Rewards vary
The variety of rewards is also broad. Washington Mutual's free checking account gives 3 cents on every purchase up to $250 per year. It also offers "WaMoola for Schools," which earns a point per purchase for the designated school. Points are converted to cash once a year and donated to the school.

Chase has three types of check card awards. Debiters can earn miles with a Continental Airlines Banking Card (two tiers: $25 annual fee equals one mile for every $2 spent; $65 annual fee brings one mile per dollar) or a United Mileage Plus Check Card ($25 annual fee, one mile per $2 spent). Or they can sign up for free for Chase Visa Extras, which gives one point for every dollar spent on qualifying purchases.

Signature-only rewards
With most check cards, points are earned only on signature purchases and aren't earned in specific cases including ATM withdrawals, balance transfers or payments made to prepaid or reloadable cards.

"I guess consumers have shown that they do respond to rewards, even when those rewards are less substantial than on the credit side," Sloane says. "I still believe the primary consumer motivation is better management of their finances. Secondary motivation is the thought that, 'as long as I'm using my debit card, I might as well get something back from that.'"

Regardless of the differences between credit card and check card reward programs, one has to evaluate how one uses them.

"Credit card reward programs only work if you use the rewards and pay off the balance every month," says McBride. "If you do pay off your balance every month, you have no need to use a debit card. You can use the issuer's money until the bill comes and keep your own cash in an interest-earning account."

Equal protection
Another feature of credit cards that has been added to check cards is fraud and loss protection. Discover Card-, Visa- and MasterCard-branded check cards now have the same fraud and loss protections as credit cards. In Bankrate's survey, every bank that offers debit cards provides fraud and loss protection.

The Fair Credit Billing Act and the Electronic Funds Transfer Act provide procedures for consumers to follow if a credit or debit card is lost or stolen.

Under the FCBA, your maximum liability for a stolen credit card is $50.

The EFTA, which covers debit cards, says liability is dependent on how quickly you report the loss or theft. If you report the theft within two business days, you are liable only for $50 in unauthorized use.

If you don't report the loss in two business days, according to the Federal Trade Commission, "you could lose up to $500 because of an unauthorized transfer. You also risk unlimited loss if you fail to report an unauthorized transfer within 60 days after your bank statement containing unauthorized use is mailed to you. That means you could lose all the money in your bank account and the unused portion of your line of credit established for overdrafts."

While the FTC's warnings about losing a check card are dire, the reality may be much less scary. Over the past few years, Discover Card, Visa and MasterCard have extended their zero liability protection to check cards. In effect, check cards now have the same protections as credit cards.

For Visa, offering zero liability "makes sense," says Krattli. "We make sure you have acceptance wherever you shop and make you feel as secure as you can be about your purchase. That's part of our brand promise -- payment options, acceptance, comfort and security for purchases."

Despite the coverage, McBride has a caveat for consumers. "While many debit card issuers offer the same protection against fraud as that of credit cards, it still means closing the barn door after the horse is already out. It may take some time to restore the funds to the account, unlike a credit card where the cardholder can withhold payment on any fraudulent purchases."

Sloane also advises consumers to find out how their bank processes debit transactions.

"Visa has extended zero liability, but the banks have to agree. A transaction must go through the Visa or other network in order to be covered. You have to ask your bank whether zero liability applies to that debit card. Otherwise, they'll say you're exposed to the FTC rules. What is not discussed much is how long it takes to get the money back into the checking account rather than credit back."

How to get money back
So what happens if a cardholder has a problem and wants her money back?

"The process varies by issuer," Krattli says. "Call the bank, let them know there's a discrepancy -- that they didn't receive what they ordered, didn't like it, etc. A customer service representative will talk them through some of the steps that will be taken. In most cases, they get the money back in their checking account within five business days."

Sloane thinks consumer concern about loss will continue to push the debit card business. "Zero liability hasn't worked itself all the way out on the debit side, and the next phase will be offers of recovery. A bank will say, 'We'll help you recover accounts.' Maybe five years from now the banks will offer some kind of insurance policy for the best customers."

PIN versus signature conundrum
As for which method of check card use -- PIN or signature -- is most secure, consumers are bit schizophrenic. According to a STAR/First Data study in 2005, 47 percent of consumers preferred PIN debit because they felt it was more secure. But the December 2005 issue of the "Chicago Fed Letter," published by the Federal Reserve Bank of Chicago, noted that "Cardholders perform twice as many signature-based debit transactions as PIN-based debit transactions. Cardholders in the United States performed 10.3 billion signature-based transactions and 5.3 billion PIN-based transactions in 2003."

And with all that activity, only 20 percent of those surveyed in the STAR/First Data study were aware that their check cards have the same zero liability coverage as their credit cards

"While debit cards offer much in the way of convenience, with equal protection against fraud and loss, they don't appeal equally to everyone," says McBride. "Consumers who always pay their credit card balances in full will find that a rebate credit card is far more attractive than a debit card due to the higher rewards and additional float time on the money."

The Bankrate Check Card Survey was conducted in January 2007. The top five banks and top five thrifts in the top 10 markets were asked about their check cards, fees associated with cards, reward programs and fraud and loss protection. These 100 banks are the same group that Bankrate surveys regularly to compile the National Index.

Check card use will continue to grow because consumers find them an efficient way to manage money. Nevertheless, there are still a few aspects such as daily usage limits, overdraft risk and blocking that need to be considered. For an explanation and tips on those items, read "Check card problems to watch for."

STATISTIC: Only seven of 100 banks and thrifts surveyed charge a fee for point-of-sale PIN transactions.

2007 Check Card Survey results

Bankrate.com surveyed the top five banks and top five thrifts in 10 of the largest markets to find out what fees they charge for check card use. We also surveyed reward programs and fraud and loss protection coverage. The survey was done by Heather Kuhn and Karen Harabin. Survey results - New York Bank name Offer check card? (Y/N) Annual fee for check card? POS fee for PIN ($) POS fee for sign ($) Offer rewards program? (Y/N) Fraud/loss protection? (Y/N) Bank of America Y None $0 $0 Y Y Chase Bank Y None $0 $0 Y Y Citibank Y None $0 $0 Y Y HSBC Bank USA Y None $0 $0 N Y North Fork Bank Y None $0 $0 Y Y Astoria Federal Savings and Loan Assn Y None $1 each $0 N Y Emigrant Savings Bank Y None $0 $0 N Y New York Community Bank dba Queens County Savings Bank Y None $0 $0 Y Y Sovereign Bank New England Y None $0 $0 N Y Washington Mutual Bank Y None $0 $0 Y Y Table from: http://www.bankrate.com/brm/news/check_card/chart1_a1.asp?market=newyork  Source: http://www.bankrate.com/brm/news/check_card/20070312_check_card_analysis_a1.asp