Online Version

Debit Card

Introduction
A debit card is a plastic card issued by banks to custom er s. The ca rd allows instant pu rcha se, r em ov ing the correct balance from the users atta ched ba nk a ccount. Debit car ds are distinct from credit cards in tha t they allow purch ase based on av aila ble funds in the account to be deducted im media tely , instead of by using a line of credit that can be repaid at a later tim e. Most debit cards hav e two features: th e a bility to pur chase item s a t stores that ha v e automa ted debit or credit card ma chines, and th e ability to withdraw cash fr om y our bank a ccount at an au tom atic transaction ma chine (ATM). They are av ailable in m ost coun tries of the world, and hav e nea rly su pplanted the use of checks in the United Sta tes. Howev er, the car ds possess m any danger s to the user, both in ter ms of possible identity theft and u nexpected bank fees. Most form s of debit car d requir e a personal identification number (PIN) as a secur ity feature. Wh en rem ov ing m oney fr om an ATM or using a n a utomatic purchasing m achine at a store, the user will ha v e to enter their PIN for v erification. In online purchases, the PIN is usua lly not requir ed, but users will often need to enter the th ree or four digit secur ity code listed on th e back of the card. Additional safety measur es com mon for debit car ds include a photograph of the cards owner on the front, or a n electronica lly r epr oduced customer signature im printed on the card. While the security features h old up well for in-person transactions, they leav e debit card users v ulnerable for online theft. If a thief steals y our wallet, they will likely hav e a ll of the infor ma tion they need to use y our debit car d for Internet tr ansactions. If y ou ha v e a dual credit/debit car d, th ey ma y a lso be able to use it in stores tha t do not r equ ire a PIN for credit u se. If y ou discov er y our ca rd missing, or notice suspicious cha rges to y our a ccount, contact y our bank im m ediately . Another peril debit ca rd users face is accidental cha rges. If y ou hav e a two or m ore linked ba nk accounts, such a s checking and sa v ings, y ou m ay sign up to h av e m oney transferred from one to the oth er in case of ov erdra wing y our account. Read the fine pr int carefully , howev er, as som e banks char ge an ov er dra ft fee of up to $2 0 US Dollars (USD) for ea ch tra nsfer of this kin d. Banks may also set a lim it of daily , weekly or monthly tra nsactions y ou can use y our debit car d for . Exceeding this limit ca n a lso result in serious charges to y our account. Rules regarding the use of debit cards v a ry fr om country to country and ca n impact their popular ity . In India , the

mercha nt can be charged for each transaction inv olv ing a debit purpose, leading to m any shops banning their use. A few countr ies or banking networks charge custom er s a transaction fee ea ch tim e they u se their debit card. In most nations, th e car ds are freely an d widely used for a ll ty pes of transactions. Studies suggest that in Canada , New Zealand and the United States, debit car ds hav e or will soon ov ertake cash as the m ost com m on form of pay ment.

Types of Debit Card

Debit car ds hav e become m or e sophisticated since they were fir st intr oduced by car d issuers. Som e cards are linked to bank accounts to allow withdr awals, while other s can be used to m ake store purchases, a nd som e car d issuer s offer custom er s rewar ds for using their debit cards. In any case, custom er s need to r ead the fine print of their cardholder agreem ents to ensur e they u nder stand the m any conditions that a re usually attached to the use of debit car ds.

Check Cards A check card is a debit card linked to y our checking account. It essentially replaces the need for wr iting checks because it can be used to m ake pu rcha ses or get cash, and the funds a re deducted fr om y our checking account. Som e check ca rds are referred to as ATM car ds because they can only be used to get cash, check y ou r a ccount ba lances and m ake deposits to a checking account at an autom atic-teller m achine. Oth er check car ds ha v e credit-card logos on them , but they 'r e not credit cards. Howev er, they can be used at store credit-card term inals to m ake pu rcha ses a nd get cash from y our checking a ccount. In any ca se, y ou should ensur e y ou understand the ter ms for u sing a check card because some banks char ge their custom ers fees for check-car d tra nsa ctions.

Prepaid Cards Prepaid debit cards also can be used to get ca sh and ma ke purchases, but they 'r e not linked to a checking accou nt. Howev er, pr epaid car ds ar e tied to an account into which a car dholder deposits m oney , which is known a s loading the car d. Car dholder s usua lly go to a participating store or check-cashing business to reload their cards when their funds run low. Prepaid cards can come with sev era l fees. For exam ple, Wa lm ar t Money Car d user s generally pa y a $3 fee to activ a te th eir cards, $3 to reloa d their ca rds a nd $2 for ATM cash withdr awals.

Rewards Cards Som e debit-card issuers offer cardholders cash-ba ck rewa rds. For instance, cardh olders m ight get 1 per cent of their card purchases credited back to their a ccounts by issuers. Rewards cards usually com e with sev er al conditions, so it's im por tant to read the issuer 's term s to under stand how y ou ca n earn rewa rds. Car dholder s usua lly only get cash back for particula r ty pes of purchases, instea d of for ev ery pur chase they make with their car ds.

Considerat ions People som etim es prefer using debit car ds to av oid accum ula ting credit-card debt and pay ing high interest rates on credit-card ba lances. Howev er, th e disadv a ntages of u sing check cards a re rev ealed by the pr oblem s car dholders ca n face if their ca rds a re stolen. Funds that ar e stolen fr om cardh olders' checking accou nts could lea v e them sh ort of m oney to pay bills. Banks will restore m oney to custom er s' a ccounts if they 're v ictim s of fr aud, but car dholder s won't hav e access to their checking a ccounts or the cash in them until fra ud issues are r esolv ed.

Advantage
We all want the conv enience that a credit card offers; pay for bills ov er the phone, sh op on the inter net, m ake hotel reserv ations from th e com fort of y ou r r oom , pay at places wher e per sona l checks a re not accepted, a nd all oth er benefits. Howev er, th ese conv en iences pr ov ided hav e 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 m oney they are spending. This realization alway s com es when people becom e fa ced with the r ealities of pay ing the hu ge debts they hav e accumulated from irr esponsible use of credit cards. This is often the star ting point for the num er ous benefits of a debit car d. Debit cards can instill financia l discipline that credit cards, in most cases, destroy . With a debit card, all y our purch ases and expenses ar e dir ectly deducted from y our checking a ccount. So, y our expenditu res ar e alway s lim ited to what the m oney in y our ch ecking account can cov er. If y ou don't get it; the prim ary adv an tage of this arr angem ent is tha t y ou don't get h aunted, by pur chases or other financial decisions y ou made in the pa st. You m ight get br oke after an uncontrolled spending spr ee, but y ou won't be expected to pay the debts and the n eck br eaking interest m onth s after y ou make tha t mistake. In essence, debit cards br ing y ou all the conv eniences th at com e with a credit card. You can use y ou r debit card any wher e a credit ca rd is a ccepted, with v ery reasonable fees - no fees in m ost cases, and no inter est to worr y about months later. Although debit car ds too hav e some disadv a ntages like, y ou m ight get r eally br oke a fter an uncontr olled spending a nd the fact that debit card cannot rebuild y our cr edit, if y ou ha v e a dam aged credit already . So, in the end y ou still hav e to compare the ben efits and m ake the choice m ost su ited to y our condition and habits. Bu t if y ou are r eally concerned about spending money y ou don't hav e, or if y ou hav e been v er y irr esponsible with a credit card, debit ca rds might just be the best way to go.

Disadvantage
Since the first debit ca rd was issued by a bank in 1 97 8, appr oxima tely 3 0 million m ore debit car ds hav e joined its ranks, according to Economy Watch. The small plastic credit card-like r ectangles a re used daily for ev er y thing from a cup of coffee to r ent pa y ments, but each swipe of th e strip puts user s at risk. While it may seem safer a nd more conv enient than car ry ing cash, using a debit card com es with a couple of downsides a s well.

Fees If y ou u se y ou r debit car d like cash, there m ay be one big difference from actually pay ing with cash. When y ou hand ov er a ctu al ca sh for y our pu rcha se, y ou pay th e price quoted a t the r egister. In some stor es, when y ou pa y with a debit car d, y ou'll pay extr a and m ay not ev en know it until y ou notice fees sta rt to pile up on y our checking account statement. The MSN Money website r eports that debit card fees ar e becoming more com m on char ged to custom ers simply for using the card. Banks are also charging fees for u sing their ca rds, the website claim s, with approxim ately 89 per cent charging between a few cents to ov er a dollar . If y our bank is one of those char ging fees, ev er y pur cha se y ou ma ke with a debit car d ma y sta rt to cost more than just what y ou see on the r egister.

Risk

Risk No one wants to ha v e his credit card stolen, but in the tim e between the thief getting y ou r car d a nd y ou contacting the com pany to cancel the account, the crim inal ha s a r estricted am ount of money to work with (y our credit lim it). On a debit ca rd, the th ief can tap into y our entire ch ecking account, whether y ou hav e a couple hundr ed dollars or hundr eds of thousands of dollar s. Not only a re y ou at higher r isk with thiev es accessing y our funds, but y ou also m ay be stuck with higher liability and r educed access to y our funds, accor ding to the U.S. Pu blic Inter est Research Gr oup. The PIRG reports tha t banks are less likely tha n credit card com panies to recoup th e losses and m ay cha rge higher fees, a lso taking longer to inv estiga te and refund the money . Unlike cr edit car ds, where y ou r tra nsaction ends with a swipe, ha v ing a debit ca rd stolen and y our ch ecking account em ptied puts y ou at risk for bounced checks or bou nced r ecur ring online pay m ents.

Credit People looking to increa se or improv e their cr edit rating m ay open a credit card to star t a history of pr om pt pa y ments and the a bility to ha ndle increa sing credit limits. Using a debit card ha s no effect on y our cr edit score, according to Card Hub, because the credit burea us n ev er see the inform ation. Because the debit card goes dir ectly to y ou r checking account, it's the bank th at gets notice of y our pay ment (or lack of). This isn't related to y our credit scor e, which is partia lly linked to the crediting agencies. Making all of y our pur chases with a debit card won't r educe y our credit scor e, but it doesn't do a ny th ing to im prov e it, eith er.

Reference

http://www.ehow.com /info_7 83 4 3 2 4_ty pes-debit-car ds.htm l http://ezinear ticles.com /?Benefits-of-Debit-Car ds&id= 44 7 487