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Understanding Debit Cards: How They Work
Posted on Monday, April 29th, 2024 | By IndusInd Bank
What is a Debit Card?
A debit card is a medium through which payments can be made using a savings account. It allows one to access the savings account conveniently, reducing the need to carry cash and facilitating online payments.
Explaining How Debit Cards Operate
A debit card is linked to your savings account or current account. The money available on the card is the money available in your account. It does not function like a credit card, as you cannot go into debt with a debit card. Your debit card can be connected to your account electronically, or it could be an offline card. Offline cards take more time to process transactions. Debit cards can be used at ATMs to withdraw money or make purchases. A personal identification number may be required to use some debit cards.
Also Read: The different types of savings accounts: Which one is right for you?
Fees Associated with Debit Cards
A debit card is an add-on to the savings account and generally has no charges. However, other charges must be considered that arise due to the usage of the debit card:
- ATM transaction fee: When you use your debit card at an ATM, you are charged according to bank policies.
- Insufficient funds fee: A debit card cannot be used to borrow, so when you spend more than you have, the transaction is declined, and you are charged fees.
- Card Replacement charges: If your card is lost, misplaced, or stolen, you must incur replacement charges.
- Foreign Transaction fee: If you use your card to purchase foreign currency, you incur a percentage charge on your transaction.
- Overdraft Fee: If you have registered for overdraft protection and spend more than your limit, the transaction will go through, but you will incur overdraft fees.
Differences Between Debit and Credit Cards
A debit and credit card may look the same; however, there are some differences between the two, as detailed below:
| Aspect | Debit Card | Credit Card |
| Financing | Linked to your bank account. | Allows you to borrow money from the issuer. |
| Rewards | Limited or no rewards programs. | Offers rewards like cashback or points. |
| Protection | Offers basic fraud protection. | Offers more robust fraud protection and dispute resolution. |
| ATM Use | Can withdraw money from an ATM using your own funds. | Cash withdrawals, even from issuing banks may incur fees as the money is borrowed. |
Also Read: What is the difference between a Credit Card and a Debit Card?
Advantages and Disadvantages of Debit Cards
Debit cards are safer to use than having to carry cash everywhere and can also be obtained with ease. They even do not pose the risk of putting users in debt, unlike credit cards. However, the number of offers and benefits is higher in the case of credit cards; there are fees associated with these cards, and usage is restricted to the amount in the account with no scope of spending on credit.
FAQs
1. What are the features of a debit card?
Debit cards provide access to bank funds for purchases and ATM withdrawals. They offer convenience, security, and budgeting benefits without incurring debt and are widely accepted for everyday transactions globally.
2. Do debit cards have purchase protection?
Some debit cards offer purchase protection, providing reimbursement or resolution assistance for certain purchases damaged, stolen, or otherwise compromised within a specific timeframe. Availability varies by issuer and card type.
3. Can I get a debit card online?
Yes, many banks offer the option to apply for a debit card online through their website or mobile banking app. After applying, you may need to verify your identity and address before the bank issues and sends you the card.
Debit cards offer convenience for withdrawals and online as well as offline transactions. Their integration with mobile payments has further revolutionized the world of payments.
Disclaimer: The information provided in this article is generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. Hence, you are advised to consult your financial advisor before making any financial decision. IndusInd Bank Limited (IBL) does not influence the views of the author in any way. IBL and the author shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information.
