What is a Debit Card?

Millions of debit card transactions are swiped every day. A debit card is one of the most convenient and hassle-free ways to pay for everyday purchases. In some places, they have almost entirely replaced check transactions.
An astonishing number of debit cards have been issued by banks since the 1970’s nearly reaching the billions as of today.

Debit Card

Technically speaking a debit card really is just a piece of plastic with a metal strip on its tail, and increasingly a chip in the center as well. It is used instead of cash when making purchases and unlike its spendthrift cousin, the credit card requires that all funds be available immediately at the time of purchase.

Each time a swipe is made the card information and the amount of the sale is sent to the merchant’s bank, their bank, in turn, sends it to Visa, Mastercard or whatever little logo the card bears, and finally, the sale is sent to the customer’s bank account. The bank then will determine whether or not the funds are in fact present and decide whether or not to approve the sale. All of this is done within a matter of seconds.

Debit cards are also favored by many because they make record-keeping easy as all debit card transactions are logged electronically by the bank or organization that issued the card.

So what else is there to know? Plenty. Next up, how to get your own debit card.

Obtaining a Debit Card

Debit cards are offered by most banking institutions and credit unions and are directly linked to a consumer’s checking account. Therefore joining and opening an account is the first necessary step. The process is pretty simple and should be seamless if you have enough funds to open an account and no previous history with a delinquent bank account. Banks usually notify other banks if you have had a poor history with one of them which can interfere with your ability to open a new account. The following are a few tips on opening a debit card account.

Tips on opening a debit card account
Research the different fees associated with the account; banks generally charge a monthly fee for having an account with them
If the checking account is marketed as free find out what the catch is; banks that offer free accounts usually do so with special conditions
Choose an account that matches your spending patterns and interest; there are often many kinds of checking accounts tailor made for certain types of people, college students for instance usually have an account type specific for them
Study and compare all of the rules and regulations associated with the debit card, what happens if you overdraw your account for example and will the bank cover a fraudulent transaction

The last tip here leads us to the next point. Are debit cards safe?

Safety and Security

One of the downsides to any electronic form of payment such as e-checks, gift cards, prepaid cards, debit cards or credit cards are that they are subject to theft and fraud by hackers or scammers. This is why so many measures have been put in place to make these transactions safe and secure for the consumer. One new measure as mentioned previously is the chip that has become the norm with all newly issued bank cards in the US.

The chip or smart card as it has been described is actually an electronic purse system. With this system, the data is stored on the physical card, not through a third party account. Each transaction also has its own unique number to add another layer of security, the number changed each time you use it for a purchase. This makes it even harder to steal or hack credit card information.

So due to the safety and security measures, it brings and particularly because America is home to about half of the world’s credit card fraud the government has now agreed to make the chip the new standard in debit and credit card usage.

Debit Cards and the Internet

Other security issues to be concerned about while using a debit card may be with online purchases. Similar to a credit card, debit card transactions that are done online use the offline debit system. This means that the funds for the purchase are put on hold and may take a few days to actually be withdrawn from a customer’s bank account. With this system, online debit transactions present the same risks mentioned earlier. Secure card information runs the risk of being stolen. To combat this buyers should only purchase from reputable websites that present security badges on their website.

Prepaid Debit Cards

The final topic that will be breached here is that of prepaid debit cards. Prepaid debit cards are an alternative to traditional debit cards and credit cards. They have become popular recently through celebrity endorsements as well as brand advertising. These cards work well for some people while others choose to stick with bank-issued debit cards. Below are the pros and cons of this debit card option.

Prepaid debit cards are safer to use because they have a set amount on them and are not connected to a bank account. Therefore if the information is stolen no more than the amount loaded to the card can be jeopardized.
There is no application process. People who have had problems with bank accounts in the past can easily get one hassle-free.
Prepaid debit cards can be used for everything that debit cards are used for such as purchases and bill payments.

The biggest downside to prepaid debit cards are the high fees that are charged in connection with the card. Consumers often have to pay for everything associated with the card. For instance: ATM withdrawals, monthly usage, loading money, customer service etc.
There are few perks that come with prepaid debit cards as well. Since these cards stand alone and are not connected to a banking institution they usually don’t offer the same perks as banks. For instance: cash back rewards, discounts to places and events, free financial consultation and many others.
Prepaid debit cards also do not provide a cushion if you need to go over the amount you have available. This can actually be a pro for people who tend to overdraw their accounts but can help you out in an emergency. Banks will usually let you overdraw a small amount as long as it is replaced in a timely manner. This is not possible with a prepaid debit card.

Considering this information a traditional debit card does appear to be the more feasible option. But if you have had issues with banks in the past or are afraid that you will overdraw your account often then a prepaid debit card may be best.

This concludes our discussion on debit cards, hopefully you have found this information useful and can benefit from it with regards to your personal financial needs.

Written by: Andrew Johnson

Andrew Johnson has been reporting for Blog.ca for more than 8 years. He studied journalism at UGC and has published two books on how journalism influences the world.


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