Debit cards have all the access of a regular credit card, including online and phone purchases.
Unlike a credit card, a debit card has no credit facility, so it offers you the convenience and security of Visa and MasterCard, using your own money. They are also good options for students and those who have bad credit as there is no credit history required for application approval.
Debit Card ComparisonRates last updated July 3rd, 2015
To find out more about debit cards, have a read of our comprehensive debit card resources. Read our guide to VISA Debit Cards for an in-depth explanation and comparison between VISA Debit Cards.
Debit Card Options – Further information
- ANZ Access Advantage – A fantastic Visa debit card with unlimited transactions for $5 a month and purchase security with the ANZ ‘Falcon’. ANZ also offer a 50% discount on their monthly fee for students. Also offers access to Visa Entertainment including access to everything from concerts to cinemas, sporting events and travel offers.
- NAB Visa Debit Card – Unlimited access to all ATMs, with a $0 monthly fee.
- St. George Visa Debit Card – Offers an online guarantee with St.George secure and 10 free SMS alerts when joined to a Complete Freedom account. Access to Visa Entertainment.
- ING DIRECT Orange Everyday Account – Get 5% Cashback on purchases when you use tap-an-go.
Comparing debit cards so you make the most informed choice.
Debit cards usually have a MasterCard or Visa logo on them and can be used to make telephone or Internet purchases in the same way that you would use a credit card. They can also be used at an ATM, and are accepted wherever the logo on your debit card is displayed.
1. Debit cards vs credit cards
A debit card is much different than a credit card. You do not have to apply for credit when you get one, which means that your credit history has no bearing on your acceptance. This is not a short-term loan like you get with a credit card since it is linked directly to your bank account and is treated the same way as cash. If you do not have the money in the bank, then you cannot make your purchase.
A lot of Australians are getting in trouble with their credit cards and build up a huge debt because it is so tempting to spend money you don’t actually have. There is no chance of this occurring when you have a debit card, and you still have the convenience of using them wherever credit cards are accepted.
Debit card fees
While there are fees associated with a debit card, they generally lower when compared to the fees you would have to pay with a credit card. If you need to go to an ATM to withdraw money for instance, you will not be charged a fee (if you use the correct ATM) that you would be charged if you used a credit card for a cash advance. Fees are always very modest with debit cards, and the best debit card is one that comes with a minimal fee attached to it.
The benefits of a debit card
The benefits of credit cards are pretty much apparent such as those using rewards programs as well as the convenience of having instant money, especially for new credit card holders. Aside from providing the same benefits, you are also assured that by using a debit card you won’t be accumulating debt over time.
Debit cards are becoming very popular as a form of card to carry. Credit cards have well publicised benefits like rewards programs, but reward transaction accounts have also been introduced to encourage you to save. While debit cards have monthly fees which end up costing as much as a typical credit card annual fee, they still have their distinct advantages over credit cards.
Only spend the money you own
For the irresponsible or inexperienced user of credit cards, it may be suitable to use a debit card if you lack the discipline to manage credit. A debit card is only linked to your savings account(s) – while you can lose all your savings with irresponsible usage, it’s impossible to get into debt. However, the one thing you’ll need to wary of is over drafting fees. If you make a $10 purchase and only have $5 left in your account which your debit card accesses, you’ll be hit with an ‘overdraft’ fee.
All the access of a credit card
Debit cards dominantly use Visa and MasterCard as payment processors – which means you have the same access that any credit card has. Restaurants, magazine subscriptions, online purchases, the whole package is accessible from a debit card. Debit cards are almost as convenient as credit cards. Debit cards can be used in most places that Visa and MasterCard are accepted. It can be used in shops and for online purchases.
2. Business debit cards
Credit cards can add buying power to your business where there previously was none. However, there are grave risks when doing this. Consider instead a business debit card.
Debit cards are interest free so that factor alone can save you a lot of money over the year. Because you are only spending the money in your account at the time, you can happily be limited to not putting an expensive item on the credit card that you cannot afford right now. With a debit card, you don’t need to worry about paying for debt or high interest rates because the money is funded by your existing savings. Since the money will be debited immediately from your bank account, you will be more careful in spending too much.
Credit cards on the other hand lend you money you don’t have and therefore provide higher risk factors.
When using a credit card, each purchase is subject to some amount of interest. Should, at the end of the month, your business not be able to pay the credit card balance, that interest becomes greater and greater each month. In essence, when making purchases with a debit card, you are in fact, paying more for each purchase once interest is figured in.
When using a debit card, these extra charges never come into play. Debit cards allow your business to make purchases interest free. There is no credit, or borrowed money, when using a debit card to rack up interest and keeps your records free of credit debt.
You are protected with debit card use.
Initially there was a concern with fraud regarding Debit Cards, but with the advent of the PIN (Personal Identification Number) and the chip technology, the public has become more accepting of the use of these cards. Just like credit cards, debit cards offer protection while you use them. Some debit cards offer 90 day protection after making your purchase. Plus they are protected with a unique PIN. A PIN you set and use every time you shop. Even if someone steals your debit card they would have to know your PIN before they could use it. Often credit cards offer protection on purchased items (great if you are travelling overseas) but it is also available on debit cards so if this is important to you, make sure that you check it out.
Some debit cards offer rewards and perks with their cards
Maybe one of the reasons you are using your credit card is because you want to earn points and redeem rewards.
Easy accessibility to money.
People who mainly rely on credit cards for their purchases sometimes visit a store that only allow cash payment. In that case they would have to rely on making an expensive cash advance. However, if you are going to use a debit card, you can withdraw cash any time from your bank, ATM’s and in shops and get instant access to cash without having to worry about high interest rates. There will be some charges and they vary depending whom you bank with. Using a debit card to withdraw cash is much cheaper than getting a cash advance on a credit card. Credit cards charge not only a fee for the transaction but also interest on the cash advance from the day it is taken out. With a debit card you can access cash at an ATM for a lesser fee and no interest to be paid.
Generally, debit cards provide the same convenience as credit cards do because the cards can be used anywhere MasterCard and Visa are accepted. You can use your debit card to shop at your favourite stores or pay your bills online or by phone.
With the ease of access to seeming “free money”, it can be easy for a business, just as easy as it is for an individual to become surrounded by credit debt. Occasionally, carrying a balance is a necessity for a business as capital is not always there to make good on the balance. However, using a credit card for everyday purchases when the capital is there is a dangerous trap to fall into.
If you want a plastic card for ease of spending, carefully look at the options of a debit cards as opposed to a credit card. You could find that credit cards will be more expensive overall, especially if you carry over unpaid balances.
3. Entertainment benefits for debit card reward programs
With so many people switching away from credit cards over to debit cards, it’s easy to see why more card providers are offering incentives, entertainment benefits and rewards programs to entice more customers.
Understanding that one of the major rewards often chosen by customers is related to entertainment, the rewards programs have moved to include some great entertainment benefits for customers using debit cards.
In most cases, the types of entertainment benefits offered to customers tend to include access to sports games, music concerts and theatre tickets. Debit card holders who are part of the rewards program are able to access slightly better seats. They may also receive preferential treatment when it comes to booking tickets earlier than the general public are allowed to book.
Further benefits also may include discounted prices on some tickets or any unsold seats, and the ability to meet some of the performers or sports personalities after the event.
4. Getting the most out of your debit card
Using debit cards will help keep your debt under control and can also generate a small amount of income. More people are using debit cards these days instead of credit cards or cash, but it is important to use them wisely. To make sure that you’re getting the most out of them. Here are some debit card tips you can use to help improve your finances.
Some debit cards offer cash back plans that give you cash rewards for using your cards for purchases. You will receive a small percentage back for a purchase that you make using the card. While it may seem relatively small, these rewards can add up fairly quickly, especially if you use debit cards to pay for groceries, utility payments or big-ticket items.
You should compare the rewards programs offered by different banks before choosing your debit card. Some financial institutions offer special perks along with the cashback program. Find the plan that gives you the most benefits, taking into account any card fees as well, and you can actually earn a bit of money by spending on your card.
It is important to remember that this is not a credit card and it is the same as paying cash for an item. Keep track of your account balance and try to keep it from going into overdraft by using it. Some banks have penalties for overdraft that come about from debit purchases. You can save a lot of money and time by simply recording the purchases you make with debit cards the same way you do with checks.
Debit cards are an easy way to access the cash you have your account without having to carry around any money, and is just as easy to use as a credit card. As long as you manage your purchasing on the card properly and avoid overdrafts, you can start earning some cash back that you can use on anything you want.
5. Debit card security
Debit cards offer a number of card guarding features to make using them more secure. More debit and credit card providers are becoming more accountable for preventing debit and credit card fraud and protecting your card security. Thus, a number of debit and credit card institutions now offer you a zero liability guarantee, where you will not be held liable for any of the charges made if your card gets stolen or lost.
The two major debit card companies, MasterCard and Visa, now much of these protections are built in with your card and provided by your debit card company or your provider/financial institution.
History of debit cards
In Australia it has been over 20 years that debit cards have been used in EFTPOS machines. Since 1988 when the first ‘switch card’ transaction took place, the Australian public has become accustomed to using ‘plastic’ for purchases. By 1995 Debit Cards had overtaken credit cards in popularity and within only 3 more years Debit Card transactions were more common than cheque payments.
In 1990 there were over 19 million debit cards in circulation and popularity has continued through to today. In 2006 there were over 27.8 million Debit Cards in use and it is estimated that there will be 34.4 million debit cards in use by 2016 in Australia.
Helping its popularity is Visa who says that the debit card is the fastest growing consumer product ever released by their company with about 70 million people using a debit card each month and with over 115 million people carrying a Visa branded debit card around the world.
Over 20 million transactions of less than $10 each are made annually. Escalating credit card debt has concerned not only the users but banks as well and also governments, so it would not be surprising to see debit cards slowly replace most credit cards as people try to pull back their debt.