How do Debit Cards Work

Debit cards are the plastic option that allows consumers to make purchases or withdraw cash directly from their bank accounts. Accepted internationally they are a convenient way of accessing ones own funds without borrowing, thus enabling customers to take control of their spending without racking up debt, as credit cards allow.

Unlike credit cards there is no interest to pay or charges for withdrawing cash. ATM use is free with ones own bank or affiliated ATM’s. Debit cards also provide the great advantage of free cash back services from retailers when everyday purchases are made, thus saving the necessity of locating a bank branch or ATM to withdraw cash.

Consumers need to be aware of their bank balances when using debit cards, and keep a record of transactions made. Withdrawals and purchases will show on bank statements or can be checked online. However if the card is used when insufficient funds are available in the bank account then fees will be incurred, unless an authorized overdraft facility is in place.

Debit cards usually double up as check guarantee cards, though there is no need in most instances to write a check if one carries a debit card. The cards can be used over the phone or online, though credit cards are recommended for high ticket items due to the greater degree of consumer protection they offer.

Banks have been improving their policies regarding consumer protection for debit card transactions but consumers should verify their banks policy before presuming protection is offered. Most now offer zero liability if the card is lost or stolen, but some stress that the loss must be reported within 48 hours.

Some banks are now also offering the facility to recover funds for damaged goods, or purchases not received. Again the policy should be checked with the individual bank concerned, which most usually requests consumers first try to rectify the problem directly with the merchant involved.

Debit card use has always been a more popular option in the UK than credit cards, and they are now gaining in popularity in the U.S. For consumers who may typically run up debt on credit cards, debit cards offer more control of the budget by only allowing spending to remain consistent with the level of funds in the bank account.

Many consumers have signed up for the option of pre-paid debit cards, but these are an unnecessary expense for anyone with a bank account. Pre-paid cards most usually require the consumer to pay fees and charges for accessing their own money, whilst regular debit cards are fee free unless the spending goes into unauthorized overdrafts.

Consumers who prefer to be in charge of their spending and avoid the risk which credit card use can entail would benefit greatly from making the switch. Overall debit cards are a convenient way of utilizing available funds, and some even come with rewards.