In essence, a debit card is a type of payment card that deducts money straight from the cardholder’s checking account to pay for purchases. That being said, debit cards eliminate the user’s need to carry physical checks or cash just to make purchases.
Also sometimes referred to as check cards, debit cards provide the convenience offered by credit cards including some of the consumer protections when associated with major payment processors such as MasterCard or Visa.
Unlike credit cards however, a debit card user will be spending within his means and not go into debt or pay for exorbitant interests, fees, and other charges. Typically however, debit cards come with daily purchase limits. This makes it impossible to make really huge purchases using the card.
Debit Card Basics
Debit cards have been known to serve a dual purpose: allow the cardholder to withdraw money from the checking account through an ATM or through cash-back functions offered by merchants at point of sale. In addition, debit cards also allow their users to make purchases.
By contrast, ATM cards will only allow users to withdraw money through ATM machines. Credit cards on the other hand will allow both purchases and ATM withdrawals for those with cash advance feature.
Purchases using a debit card can be done with or without a PIN (personal identification number). If the debit card is associated with a major financial institution like Visa or MasterCard, it can be used pretty much like a credit card—there is no need for the cardholder to risk exposing their PIN.
The money will still be deducted directly from the user’s checking account and no finance charges will be deducted when the debit card is used just like a credit card. And just like credit cards, some debit card providers also offer reward programs like a percentage back on all purchases.
Different Types of Debit Cards
Undoubtedly, a debit card is considered an effective and convenient tool for those who would like to make various kinds of purchases. And since debit card transactions are reflected on the user’s bank account immediately, tracking each and every penny is a lot easier, making keeping an eye on the budget effortless.
Some of the most common types of debit cards include:
Online debit cards. Transactions using online debit cards are secured using a personal identification number or PIN. The PIN is validated each and every transaction.
Offline debit cards. Offline debit cards are often associated and carry the logos of huge credit institutions like Visa or MasterCard. When used for transactions, the cardholder’s signature will be required. Also, transactions done using offline debit cards might take at least 2 to 3 days to reflect in the account balance of the user.
Prepaid debit cards. This type of card is also commonly referred to as reloadable debit cards. Cardholders of prepaid debit cards need to load money onto the card first before it can be used for any transaction. Many users prefer using prepaid debit cards as they are not only secure, they also provide users with quick and easy access to cash.