Debit Card

                       A debit card is a plastic card issued by banks to customers. The card allows instant purchase, removing the correct balance from the user’s attached bank account. Debit cards are distinct from credit cards in that they allow purchase based on available funds in the account to be deducted immediately, instead of by using a line of credit that can be repaid at a later time.

Most debit cards have two features: the ability to purchase items at stores that have automated debit or credit card machines, and the ability to withdraw cash from your bank account at an automatic transaction machine (ATM). They are available in most countries of the world, and have nearly supplanted the use of checks in the United States. However, the cards possess many dangers to the user, both in terms of possible identity theft and unexpected bank fees. Most forms of debit card require a personal identification number (PIN) as a security feature. When removing money from an ATM or using an automatic purchasing machine at a store, the user will have to enter their PIN for verification. In online purchases, the PIN is usually not required, but users will often need to enter the three or four digit security code listed on the back of the card. Additional safety measures common for debit cards include a photograph of the card’s owner on the front, or an electronically reproduced customer signature imprinted on the card.

While the security features hold up well for in-person transactions, they leave debit card users vulnerable for online theft. If a thief steals your wallet, they will likely have all of the information they need to use your debit card for Internet transactions. If you have a dual credit/debit card, they may also be able to use it in stores that do not require a PIN for credit use. If you discover your card missing, or notice suspicious charges to your account, contact your bank immediately. Another peril debit card users face is accidental charges. If you have a two or more linked bank accounts, such as checking and savings, you may sign up to have money transferred from one to the other in case of overdrawing your account. Read the fine print carefully, however, as some banks charge an overdraft fee of up to $20 US Dollars (USD) for each transfer of this kind. Banks may also set a limit of daily, weekly or monthly transactions you can use your debit card for. Exceeding this limit can also result in serious charges to your account.

Rules regarding the use of debit cards vary from country to country and can impact their popularity. In India, the merchant can be charged for each transaction involving a debit purpose, leading to many shops banning their use. A few countries or banking networks charge customers a transaction fee each time they use their debit card. In most nations, the cards are freely and widely used for all types of transactions. Studies suggest that in Canada, New Zealand and the United States, debit cards have or will soon overtake cash as the most common form of payment.

--Types of Debit Card--

                         Debit cards have become more sophisticated since they were first introduced by card issuers. Some cards are linked to bank accounts to allow withdrawals, while others can be used to make store purchases, and some card issuers offer customers rewards for using their debit cards. In any case, customers need to read the fine print of their cardholder agreements to ensure they understand the many conditions that are usually attached to the use of debit cards.

Check Cards :: A check card is a debit card linked to your checking account. It essentially replaces the need for writing checks because it can be used to make purchases or get cash, and the funds are deducted from your checking account. Some check cards are referred to as ATM cards because they can only be used to get cash, check your account balances and make deposits to a checking account at an automatic-teller machine. Other check cards have credit-card logos on them, but they're not credit cards. However, they can be used at store credit-card terminals to make purchases and get cash from your checking account. In any case, you should ensure you understand the terms for using a check card because some banks charge their customers fees for check-card transactions.

Prepaid Cards :: Prepaid debit cards also can be used to get cash and make purchases, but they're not linked to a checking account. However, prepaid cards are tied to an account into which a cardholder deposits money, which is known as loading the card. Cardholders usually go to a participating store or check-cashing business to reload their cards when their funds run low. Prepaid cards can come with several fees. For example, Walmart Money Card users generally pay a $3 fee to activate their cards, $3 to reload their cards and $2 for ATM cash withdrawals.

Rewards Cards :: Some debit-card issuers offer cardholders cash-back rewards. For instance, cardholders might get 1 percent of their card purchases credited back to their accounts by issuers. Rewards cards usually come with several conditions, so it's important to read the issuer's terms to understand how you can earn rewards. Cardholders usually only get cash back for particular types of purchases, instead of for every purchase they make with their cards.

Considerations::

                       People sometimes prefer using debit cards to avoid accumulating credit-card debt and paying high interest rates on credit-card balances. However, the disadvantages of using check cards are revealed by the problems cardholders can face if their cards are stolen. Funds that are stolen from cardholders' checking accounts could leave them short of money to pay bills. Banks will restore money to customers' accounts if they're victims of fraud, but cardholders won't have access to their checking accounts or the cash in them until fraud issues are resolved.

--Advantages--

                We all want the convenience that a credit card offers; pay for bills over the phone, shop on the internet, make hotel reservations from the comfort of your room, pay at places where personal checks are not accepted, and all other benefits. However, these conveniences provided have often blinded people from the serious dangers of using credit cards. The worst of these is the illusion that is often created. Most people forget they don't actually own the money they are spending. This realization always comes when people become faced with the realities of paying the huge debts they have accumulated from irresponsible use of credit cards.

This is often the starting point for the numerous benefits of a debit card. Debit cards can instill financial discipline that credit cards, in most cases, destroy. With a debit card, all your purchases and expenses are directly deducted from your checking account. So, your expenditures are always limited to what the money in your checking account can cover. If you don't get it; the primary advantage of this arrangement is that you don't get haunted, by purchases or other financial decisions you made in the past. You might get broke after an uncontrolled spending spree, but you won't be expected to pay the debts and the neck breaking interest months after you make that mistake. In essence, debit cards bring you all the conveniences that come with a credit card. You can use your debit card anywhere a credit card is accepted, with very reasonable fees - no fees in most cases, and no interest to worry about months later. Although debit cards too have some disadvantages like, you might get really broke after an uncontrolled spending and the fact that debit card cannot rebuild your credit, if you have a damaged credit already. So, in the end you still have to compare the benefits and make the choice most suited to your condition and habits. But if you are really concerned about spending money you don't have, or if you have been very irresponsible with a credit card, debit cards might just be the best way to go.

--Disadvantages--

                      Since the first debit card was issued by a bank in 1978, approximately 30 million more debit cards have joined its ranks, according to Economy Watch. The small plastic credit card-like rectangles are used daily for everything from a cup of coffee to rent payments, but each swipe of the strip puts users at risk. While it may seem safer and more convenient than carrying cash, using a debit card comes with a couple of downsides as well.

--Fees--

 

             If you use your debit card like cash, there may be one big difference from actually paying with cash. When you hand over actual cash for your purchase, you pay the price quoted at the register. In some stores, when you pay with a debit card, you'll pay extra and may not even know it until you notice fees start to pile up on your checking account statement. The MSN Money website reports that debit card fees are becoming more common charged to customers simply for using the card. Banks are also charging fees for using their cards, the website claims, with approximately 89 percent charging between a few cents to over a dollar. If your bank is one of those charging fees, every purchase you make with a debit card may start to cost more than just what you see on the register.

--Risk--

            No one wants to have his credit card stolen, but in the time between the thief getting your card and you contacting the company to cancel the account, the criminal has a restricted amount of money to work with (your credit limit). On a debit card, the thief can tap into your entire checking account, whether you have a couple hundred dollars or hundreds of thousands of dollars. Not only are you at higher risk with thieves accessing your funds, but you also may be stuck with higher liability and reduced access to your funds, according to the U.S. Public Interest Research Group. The PIRG reports that banks are less likely than credit card companies to recoup the losses and may charge higher fees, also taking longer to investigate and refund the money. Unlike credit cards, where your transaction ends with a swipe, having a debit card stolen and your checking account emptied puts you at risk for bounced checks or bounced recurring online payments.

--Credit--

           People looking to increase or improve their credit rating may open a credit card to start a history of prompt payments and the ability to handle increasing credit limits. Using a debit card has no effect on your credit score, according to Card Hub, because the credit bureaus never see the information. Because the debit card goes directly to your checking account, it's the bank that gets notice of your payment (or lack of). This isn't related to your credit score, which is partially linked to the crediting agencies. Making all of your purchases with a debit card won't reduce your credit score, but it doesn't do anything to improve it, either.