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Debit Cards
Corporate Credit Cards
Small Business CardsSummary:Debit cards, usually linked to a bank account, are becoming the financial instrument most used by consumers, rapidly overtaking credit cards. Debit cards are accepted most anywhere credit cards are honored. But, unlike credit cards, the money belongs to the account holder and can be used at little or no cost to said holder.
The most widely used financial instrument today is probably a bank chequeing account (sometimes a savings account) partnered with a debit card. The bank account is usually replenished by direct deposit from a person's employer once or twice a month and perhaps sees sundry other activity, such as deposited returns on investments, or cheque deposits the owner has received as a gift from mom or as recompense on a debt by a friend.
| Interest Rate (p.a.) | Balance Transfer Rate (p.a.) | Annual Fee | Cash Advance Rate (p.a.) | |||
|---|---|---|---|---|---|---|
 ANZ Visa Debit Card | The ANZ Access Advantage allows unlimited everyday ANZ transactions for a meager $5/month. Enjoy the freedome of Visa without the credit. | $72 |   | |||
 NAB Visa Debit Card | The NAB Visa Debit comes with three options - NAB eBanking, NAB Classic Banking and NAB Gold Banking - to suit all needs. | $4 | |
The Money Is Yours
The fine point of the matter is that all the money in the account belongs to the owner and no one else. (Joint accounts considered.) And the money therein can be used freely by the owner(s), usually at no charge; though there may be a carrying fee on the bank cheque account itself and perhaps a small card fee as well. Usually, especially on bank accounts that carry large balances every month, these fees are not exacted.
Exactly What Is a Debit Card?
Though financial advisers might sniff at the characterisation, a debit card could be seen as a sort of plastic cheque, without the bothers of writing a cheque, coupled with many of the advantages of a credit card. Debit cards and credit cards, though they greatly resemble each other, are really quite different creatures. Let's take a closer look.
With a debit card you can –
- Forget about the worries of carrying cash. Customers who carry a lot of cash are a target for thieves, risking both their finances and their safety. If cash is lost to thieves or forgetfulness, there is no recourse for recompense. Debit cards lighten the pocket or purse load while affording easy access to funds. If a card is lost or stolen, it's easy to deactivate the card. Debit cards usually cannot be used without a personal identification number (pin).
- Eliminate the temptation to overspend. Credit cards do afford customers increased purchasing power, but we know where that can lead. Overspending on a credit card can cost a lot in terms of late or missed payments. Fees, penalties, and high interest rates are what lead many folks into a downward spiral of credit card debt. With a debit card, no money is available beyond what is in the bank account. This allows you to control your debt more easily.
- Use your card anywhere most credit cares are accepted. When a bank enters into a relationship with the Visa or MasterCard network, they pay for the right to use those logos on their debit cards. These are symbols of trust and allow the user to make purchases or get cash practically anywhere in the world. And many, though not all, of the services, assurances, and freedoms afforded credit cards with those logos, are also found with debit cards bearing the emblems.
With a debit card you must realise that –
- You can cause an overdraft on your bank account. In spite of the fact that your spending is governed by the amount of funds you have in your account, just as with a chequeing account you are still susceptible to overdrafts. Some networks interact with your bank faster or slower than others. A charge could show up immediately, or take days to register. Overdrafts cost substantially in fees. But, as with a chequeing account, you can ask your bank for overdraft protection. This will help you avoid rejection embarrassment at the register, as well. Just remember that this service isn't free. Don't come to rely on it or you're defeating the controlled-spending aspect of your debit card.
- You can affect your credit scores. Unfortunately, using your debit card wisely will not boost your credit scores. But, they can harm your credit. Carrying small balances or carelessness regarding preventable overdrafts do get a footnote in your account and this information is relayed to credit reporting agencies. Even though they are not such, debit card users are advised to treat their accounts much as they would their credit accounts.
- You lack some protections afforded credit cards. While your debit card may carry the logo of a credit card which allows you access to the worldwide network for purchases and cash, it may not have many of the features of a credit card, such as providing automatic insurance on purchases, or fraud and theft protections. You should check with your banker to understand exactly what your liabilities and protections might be.
- You can inadvertently put a hold on your account. Should you use your debit card to reserve a rental car or a hotel room, a sizeable hold is usually put on the account to compensate the vendor should costs be incurred beyond the price expected. Such as when you overdo mileage on a rental car or make a lot of phone calls from your hotel room. These so-called holds could freeze up a substantial portion of whatever funds are in your account until the total bill is finally entered. This could sometimes take days to charge through, so be careful.
The World Is Becoming a Cashless Marketplace, But ...
Even though the global economy is drifting away from cash exchanges, there are still instances when only cash money talks. Cash for the kids' school lunch, a tip for the delivery man, a coin toss for a toll, and other small exchanges still require cash. For that reason it's a good idea to keep an eye out for ATM's, near your place of business or near your home, that are part of your bank's network and therefore don't incur exorbitant fees for cash access. Having to pay up to three or four dollars just to get one's own money can be quite irritating.
The Final Word Regarding Debit Cards Vs. Credit Cards
Some people operate debit as well as credit cards, but your financial character should indicate which card is best for you. Used unwisely or without discipline, credit cards can get you into a world of trouble with debt. If you know you can't afford a credit card debt, opting for a debit card would be much safer while still allowing you enough freedom to spend thoughtfully.
