Basic Understanding of Debit Card

Debit cards provide a secure form of payment through which money, or the amount of a purchase, is withdrawn straight from the user’s checking account. These payments can be made in-person at cash registers and ATM machines or online and through mobile payment and transfer platforms. Due to its convenience, debit cards are one of the most popular methods of payment, useful for teens, adults, and the elderly.

For every payment done via debit card, a real-time transaction from the user’s checking account is performed, where the amount spent is the amount deducted from the said account. Since the card is directly linked to and has access to the user’s account, the spending limit is tied to the amount available in that account. Accordingly, the spending limit will vary along with fluctuations in the account balance.

However, there are daily purchase limits that the user must comply with, and, as such, cannot spend more than a certain amount within 24 hours. Such policies make it almost impossible to accrue debt, making the debit card the ideal method of payment for many.

Using a debit card is almost free. Most banks give users a free card upon opening a checking account. Setting it up for usage doesn’t require much more than spending a little time and determining a PIN (personal identification number). And there are no membership or cash-advance (the fee charged for withdrawing cash with a credit card) fees for the user to keep track of.

Unfortunately, even debit card users aren’t free from charges, they are required to pay fees for certain transactions. Withdrawing money from banks not from or affiliated with the bank that issued the card will cost the user an ATM transaction fee. There is also a fee for making purchases or withdrawals in another country in foreign money. VIsa and Mastercard generally charge 1-3% for this fee. If you go to certain banks, you can manage to have no foreign transaction fee.

If the card becomes lost, stolen, damaged, or due to debit card fraud, it requires a replacement, a small fee may be charged to have a new one mailed from the bank. And if the user tries to make a purchase amounting to a cost larger than the balance available in their checking account, the card declines.

However, if the user registers for overdraft protection and spends more than what they have in their account, or goes over their spending limit, they become charged with insufficient funds charges.

For those without a checking account, a type of debit card called the prepaid debit card provides a way for the user to make payments in a similar manner to the standard debit card. The prepaid debit card has a set amount of money up to which the user is allowed to spend. For this, money must be loaded onto the card in advance via cash, checks, online transfers, or in-person visits to a retailer.

It is also good for online or electronic purchases and is refillable and, therefore, reusable. And although this makes it sound convenient, it is also very costly. It racks up extra costs by charging the user several fees, like activation, monthly, and reloading fees, along with the fees a standard debit card user has to pay. They may even charge the user for checking the card balance.