What is a Debit Card? Debit cards explained and how you could use one

Generally speaking Debit Cards are cards that are attached to a savings bank account or cheque account. A Debit Card could be viewed as an electronic cheque, meaning that you are paying with something from an account where there is already money in the bank. It comes in the form of a plastic card and looks similar to a credit card.

A Debit Card can be used in the same way as a credit card in most cases but only if there are already funds in the bank account. It will be impossible to process a payment using a Debit Card either for goods or for cash from an ATM, if there are no funds in the account.

There is one exception to having a Debit Card attached to a bank account and that is a ‘prepaid’ Debit Card which is not linked to a bank account but which has funds put into the account over the counter or online and can be topped up as and when needed.

The major difference between a Debit Card and a credit card is that you are using your own funds, not spending and putting the cost of the purchase or cash advance on credit where you may get charged interest.

Using a Debit Card is quite simple:

• Swipe it through an EFTPOS machine to pay for goods
• Access cash from an ATM with a pin number
• Swipe and pay for goods but also ask for ‘cash out’ which means you can get some cash at the same time as purchasing and thereby reduce fees for cash withdrawals from ATM’s

Security on bank or credit cards is a concern for shoppers, especially online but it has proven that debit cards are safer to use than credit cards. Australian banks are offering extra security features for users of Debit Cards, even to the extent of tracking unusual transactions. You could receive a phone call if your card is used in an unusual manner.

Mentioned earlier was the fact that Debit Cards are like an electronic cheque and many companies and personal bankers are replacing a cheque book with a Debit Card. Some cards even have reward points and also purchase insurance, just as if you were using a credit card. This can be quite a bonus if you are using your card for business purposes because the rewards points can add up quite quickly.

One would think a Debit Card would be a ‘take it or leave it’ decision, but it is not as easy as that. There are quite a range of debit cards available and if you want to have one it would pay to make some enquiries and find out which card will have which benefits that will suit you best and reward you the most. Some of the various options are:

• A travel card like Visa Passport where you load the card before you go on your overseas trip and you can withdraw funds in foreign currency when you arrive overseas (these cards have replaced traveller’s cheques, offering superior convenience and security.
• A ‘card’ for internet use where no actual card is issued as such
• Various rewards points
• Varying fees to manage the card – this is a must to research
• The number of fee free transactions

Give serious consideration to the use of the card you are going to get (you can always get two) and what features are being offered and what will benefit you the most.

See our debit cards comparison page for a the best deal on VISA Debit Cards and MasterCard Debit Cards

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