Debit Cards or Credit Debit Cards are electronic plastic cards that are used as a substitute for cash. Bank Debit Cards help reduce the need for carrying cash and checks. Debit cards are directly linked to a cardholder’s bank account. Whenever a card holder withdraws money from an ATM or uses the debit card for making payments, his/her account balance is automatically reduced.
History of Debit Cards
Two decades ago, the number of debit cards in circulation was approximately 19 million. This figure is projected to cross 34.4 million by 2016. The history of debit cards shows that they have largely been used to pay for food and drinks.
Debit Cards vs. Credit Cards: Similarities and Differences
The same financial institutions offer both debit cards and credit cards. Both cards offer special rewards, such as points and cash back on purchases made through the card. Debit cards and credit cards can be used to make online payments with the help of the Pin number assigned to them. They can be used to withdraw money from ATMs, depending on the cash limit available on these cards.
Debit cards and credit cards differ in some significant ways. In the case of a credit card, the issuer offers credit and overdraft facilities. This facility is not available with a debit card, which will only debit payments from existing and available funds within the cardholders account. A credit cardholder therefore has a monthly bill to pay in every month that the card is used. If they don’t pay that bill, high interest charges are applied. A debit card holder is free from the hassle of paying those bills, and from the risk of building up large debts to credit card companies.
Bank Debit Cards: Types
Debit cards are offered by banks in the following forms:
- Online Card
- Prepaid Card
- Offline Card
- Electronic Purse Debit Card
- Debit Cards for telephone, mail and internet transactions.
Debit Cards: Benefits
Debit cards offer the following benefits:
- They help people to be disciplined financially, since one cannot splurge with the limited amount of funds deposited for the card.
- A person with poor credit can obtain a debit card without too much trouble.
- Debit cards can be used to make online purchases and payments.
- They provide freedom from carrying cash and checks while traveling, thereby offering more safety.
- Debit cards do not charge high interest rates or fees on card transactions.
Disadvantages of Debit Cards
Debit cards, however, do entail certain limitations, such as:
- Debit cards come with lesser fraud protection facilities than credit cards.
- Some transactions cannot be carried out with a debit card, such as renting a car in a foreign country.
- You can only use as many funds as you have available. Therefore, in case of an emergencies where credit is urgently needed beyond your account balance, a debit card will not be enough to meet your needs.
Debit Cards: Issuers
The banks issuing debit cards include:
- Bank of America
- American Express
- Deutsche bank
- Capital One
- Standard Chartered