Debit Card One of the major things that comes with finances and banking is using cards. And there are is an overwhelming number of dos, don’ts, and rules for every card, and let’s not shy away from the fact that one might get confused among them. So, today I bring to you one of the widely used cards, what it is, how it works, its pros and cons.
The card we will talk about today is a debit card. Let’s start with the first W word- WHAT is a debit card? Well, a debit card is a payment card which when used, deducts money from the consumer’s checking account directly. A rectangular piece of plastic card that eliminates your need to carry cash or cheques to make cash, and also used to withdraw it from ATMs. Doesn’t it feel quite the hassle-free option? A debit card is linked to the user’s checking account at a bank or the financial institution that issues it, and it is this account from which the money is deducted.
In one way, we can say that debit cards work as a cross between ATM cards and credit cards. As discussed earlier, like a credit card, you can use it to purchase goods, and your money get deducted on the spot, unlike a credit card where you have to borrow money and then repay it later; and you can also use a debitt card to withdraw cash from an ATM machine like an ATM card. The amount of money you can spend/withdraw is limited and that limit is tied to the size, type, and the sum of money you have in you account. They also have daily purchase limits, which means that you cannot spend beyond a certain sum of money (as regulated by the issuer of the card) in 24 hours. Did you also know that debit card purchases can be made with or without a PIN? If your debit card has a major payment processor’s logo, then it can often be run without a PIN, like a credit card.
Now debit cards are
handy and easy to use, but as any other asset, you should also know a debit card’s pros and cons. A debit card is very useful in the fact that it saves you from going into debt, because unlike credit cards, you don’t borrow money you might not be able to repay, rather, you spend only what you have at the moment. It is in many ways safer than cash and also saves some weight on your wallet. As opposed to lost cash which cannot be retrieved unless returned, which we all know, is not an ideal situation, when cards get stolen, we can report them, and block their usage, saving our money. But what you have to remember is that, unlike credit cards, they neither offer many perks, nor help to build your credit score. They are not also much effective when it comes to performing big transactions- something you have to do, or want to do, but cannot at the moment, because you don’t have enough funds in your account. Last but not the least, with things like auto-bill pay, ATM withdrawals, etc., you might not remember how much savings your account has. In such situations, it gets difficult to use a debit card. The card, if used in cases of insufficient balance, might be declined, or the user might incur overdraft fees. This was debit card for you. I sincerely hope that this short guide helped you revive all the points you need to know about a debit card, and that now you feel a bit at ease when it comes to using a debit card. With this, I take your leave. Until next time!