Debit Card Basics & Advices

A debit card, a type of bank card or check card, is the third common money card used worldwide. This page gives you definition, overview, advantages and disadvantages, fees, and advices when choosing a debit card as well as various tips and discussions, and more.

Definition

Debit card is a plastic bank card which provides an alternative payment method to cash when making purchases. Functionally, it can be called an electronic check, as the funds are withdrawn directly from either the bank account or from the remaining balance on the card.

Overview

The use of debit cards has become widespread in many countries and has overtaken the cheque, and in some instances cash transactions by volume. Like credit cards, debit cards are used widely for telephone and Internet purchases, and unlike credit cards the bearer of the debit card doesn't have to pay back.

Debit cards can also allow for instant withdrawal of cash, acting as the ATM card for withdrawing cash and as a cheque guarantee card. Merchants can also offer "cashback"/"cashout" facilities to customers, where a customer can withdraw cash along with their purchase.

In some cases, the cards are designed exclusively for use on the Internet, and so there is no physical card.

Types of Debit Card

There are currently three ways that debit card transactions are processed: online debit (also known as PIN debit), offline debit (also known as signature debit) and Electronic Purse Card.

Online Debit Card

Online debit cards require electronic authorization of every transaction and the debits are reflected in the user’s account immediately. The transaction may be additionally secured with the personal identification number (PIN) authentication system and some online cards require such authentication for every transaction, essentially becoming enhanced automatic teller machine (ATM) cards.

One difficulty in using online debit cards is the necessity of an electronic authorization device at the point of sale (POS) and sometimes also a separate PIN pad to enter the PIN, although this is becoming commonplace for all card transactions in many countries.

Overall, the online debit card is generally viewed as superior to the offline debit card because of its more secure authentication system and live status, which alleviates problems with processing lag on transactions that may have been forgotten or not authorized by the owner of the card.

Offline Debit Card

Offline debit cards are used at the point of sale like a credit card. This type of debit card may be subject to a daily limit, and/or a maximum limit equal to the current/checking account balance from which it draws funds.

Transactions conducted with offline debit cards require 2–3 days to be reflected on users’ account balances.

Prepaid Debit Card

Prepaid debit cards, also called reloadable debit cards or reloadable prepaid cards, are often used for recurring payments.

The payer loads funds to the cardholder's card account. Particularly for US-based companies with a large number of payment recipients abroad, prepaid debit cards allow the delivery of international payments without the delays and fees associated with international checks and bank transfers.

Web-based services such as stock photography websites (istockphoto), outsourced services (oDesk), and affiliate networks (MediaWhiz) have all started offering prepaid debit cards for their contributors/freelancers/vendors abroad.

Electronic Purse Card

This type of debit card is smart-card-based in which value is stored on the card chip, not in an externally recorded account, so that machines accepting the card need no network connectivity.

Advantages and Disadvantages

Debit and check cards, as they have become widespread, have revealed numerous advantages and disadvantages to the consumer and retailer alike.

Advantages

Advantages over credit card and chegue are as follows:

• Doesn't need credit,
• Less fees compare to credit card,
• Immediate payment therefore hassle free.
• Transactions quicker and less intrusive then checks.
• Obtain cash from an ATM or a PIN-based transaction at no extra charge, other than a foreign ATM fee.

Disadvantages

The Debit card has many disadvantages as opposed to cash or credit:

• Some banks are now charging over-limit fees,
• Penalty fees for overdrafts, over-the-limit.
• May have rejections or overdrafts, and rejected transactions by some banks.
• In some countries debit cards offer lower levels of security protection than credit cards.
• In many places, laws protect the consumer from fraud a lot less than with a credit card.
• No protection against undelivered products.
• When a debit purchase is made, the consumer has spent his/her own money, and the bank has little if any motivation to collect the funds in case of dispute.

Our Advices

If you can get a debit card, get one instead of a credit card. Debit card provides a wide ranges of services that normal bank card doesn't have. It has many features that a credit card has. It's a little limited compare to credit card, but it's much cheaper.