The Delights of Debit Cards
Debit cards are actually very different than credit cards. Credit cards make money available for you from a bank or other financial institution, just like a loan. You use credit cards with the understanding that you will repay the amount, with interest added if you do not pay your balance in full each month. You receive a monthly statement detailing your charges, credits, current balance and minimum payment requirements. When you use a debit card, on the other hand, you are actually taking your money from your own bank account. Debit cards will only allow you to spend what is in your bank account. It is a simple and direct transaction between the merchant and your personal account.
Debit cards are actually similar credit cards in many ways. When you use a debit card instead of writing a check, you can avoid having to show ID or give out any personal information such as your phone number to complete the transaction. Just like a credit card, a debit card can free you from carrying cash or a checkbook. A debit card can also be used as easily as a credit card when you travel. Debit cards may be more widely accepted by merchants than checks, especially in other states or countries where your card brand is accepted.
There are also advantages to debit cards over credit cards. It is often easier to get a debit card than to obtain a credit card. A debit card is a quick, pay now product that will not leave you with debt or interest payments. If you return goods or cancel services purchased with a debit card, it is treated as if the purchase were made with cash or a check. This means that you are instantly refunded the cash into your account.
Of course, a debit card doesn’t offer the grace period that many credit cards do if you pay your balance in full at the end of each month. Using a debit card may also provide you with less protection than a credit card if you purchase items which are never delivered, are defective, or were misrepresented. Still, just as with credit cards, you can dispute unauthorized charges or other errors within 60 days by contacting the card issuer if the problem cannot be resolved with the merchant.
There are actually two types of debit cards available. "On-line" debit cards are usually enhanced ATM (automated teller machine) cards which work the same as they would in an ATM transaction. They provide an immediate electronic transfer of money from your bank account to the merchant’s bank account. When you access your account at a store terminal, you punch in your personal identification number (PIN) just as you would at any ATM. The system then checks your account to see if it has enough money available to cover the transaction and then completes it for you. "Off-line" debit cards generally look just like a credit card and transaction are similar to those made with a credit card. The merchant’s terminal reads your card, identifies it as a debit rather than a credit card, and creates a debit against your bank account. The main difference is that instead of deducting the cost from your account immediately, it stores the debit for later processing, usually within a few days. Most transactions are still verified to see if adequate funds are available, but instead of using a PIN number, the customer signs a receipt, just as with a credit card.
A debit card is a great option for anyone who wants the convenience of a credit card without the risk of falling into credit card debt