All you need to know about Debit Cards


Unless you have been living under cave, you would not know the wonders of a debit card. While you might have been using a credit card for years, debit cards offer a great alternative to cashless transactions because of its benefits.

What is so good about debit cards?

A debit card is one which is connecting to your banking account. In most cases, it is your savings account. The good thing about debit cards is that it functions very much like a credit card while offering you ATM facilities. This is because they are linked to either VISA or MasterCard, making them acceptable at merchants that accept these cards.

How a Debit Card Works

The first thing you need to know is that a debit card transaction is very much the same as a credit card. When you swipe the card, the amount will be placed on hold. If you check your banking account, you will see that it falls under the pending transaction. After the merchant submits their transactions, then the amount is deducted and transferred to them. Take note that some merchants take longer than others to file their transactions in which means it might be pending in your account for a longer time. This includes merchants like car rental or hotels where a certain amount is put on hold as deposit. Hence, you need to ensure that you have sufficient funds in your account before making any additional payments.

How to know your Debit Card transactions?

In most cases, the transactions will be reflected as a POS transaction with the name of the merchant. Meanwhile, an ACH transaction means that the money from your account was directly debited and does not involve you using your card physically. This will help you to know if your card has been used by some unauthorized party.

Do you get overdraw?

Unlike credit cards, you are not accorded with any credits in your card. This means that you only get to use the maximum amount in your account. However, there are some banks that let you overdraw where you can use a little more than your balance. This however, occurs where you will be charged a certain fee which you will be informed about.

Tips when using a debit card

There is no two-ways about it! You do not want to lose your debit card at any time. This would be the biggest precaution to take with this platform because it simply means anyone can easily use your card. Unlike conventional credit cards, payment cards today can be used without swiping or inserting into the terminal.
If you lose your card whether you dropped it or it was stolen, you must terminate or block the card immediately. This is to prevent anyone using your money in your account.

How different is debit and credit cards?

Make no mistake about it, debit cards are very different from credit cards. To begin with, you are spending money you don’t have with credit cards and you are spending money you have with debit cards. The debit card takes the money from your banking account while the other takes it from your line of credit and its available funds.
In terms of convenience, both the cards are the same. However, there are still many merchants out there who has yet to accept debit cards. Hence, carrying your debit card to other parts of the world might not be your best option. Both credit and debit cards today require the use of a PIN number for the transaction to approve. This functions very much the same like your ATM which is the same process when you withdraw funds from your savings account.

Meanwhile, debit cards to not involve interest rates while credit card does. When you use a debit card, the interest rate rule does not apply because the bank does not borrow you any money unless you overdraw. The credit card meanwhile has interest charged on transactions unless you are buying on a 0% interest purchase. However, if you make your payment with credit cards within 30 days of the purchase, you will not be charged any interest. For merchants, the payment is the same while the bank will charge you for transactions for both types of cards.

Types of purchases

Debit cards will be best used to purchase low to middle priced items. This includes groceries, toiletries, clothing and such. It might not be the best option to use for booking of hotels or car rentals or for installments. This is because if you use your debit card for Standing Instructions, and there is insufficient funds due to an emergency, there will be certain charges imposed.

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