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What Is A Debit Card?

Aug 17, 2007
If you are new to credit cards and banking, you may have heard of debit cards but be unsure of their exact features. Debit cards are a viable alternative to credit cards, or can work in conjunction with credit cards to give you a variety of payment options. Here is some useful on debit cards and how to use them to your advantage.

Debit cards defined

A debit card is a plastic card that looks like a credit card, and it allows you to withdraw funds on deposit in your account. This means that you can pay by card or draw money out of an ATM. The debit card payment withdraws funds that are already in your account, effectively paying for things with cash you already have.

How do they differ from credit cards?

Although debit cards look like credit cards, they are quite different. The funds you spend on a credit card are loaned to you by your card issuer, and when you make a purchase you are basically borrowing money or 'credit'. However, with debit cards you are simply making a card purchase using the available funds in your bank account. There is no credit facility on a debit card, so you cannot spend more than the money you already have.

Advantages of a debit card

The advantage of a debit card is that you can spend your own money without having to withdraw it. You have the convenience and safety of a credit card without having to borrow money. It also stops you from overspending and getting into debt because you are only spending what you earn. You can also get cash from merchants when you make a purchase, just like using an ATM.

Drawbacks of a debit card

The advantages of a debit card are also its drawbacks. You are only spending your own money, so you cannot buy large items on credit like you would with a credit card. This gives you less financial flexibility and means you have to save up to buy large items. Also, the security features of a debit card are not as good as credit cards, so you can lose money if anything goes wrong, especially when making purchases online.

Where can I get debit cards?

You can get debit cards from most banks and financial institutions. Most current accounts are issued with a debit card automatically, which allows you to spend the money from your account on a card. If you don't have one on your current account, then ask your bank for details.

Should I have a debit card?

A debit card can be a very useful financial tool, as it means you don't have to carry cash around all the time. Also, debit cards stop you from spending too much money that you don't have. However, because you cannot spend more than you have you are limited in what you can buy, and so using a debit card in conjunction with a credit card is probably the most sensible option.
About the Author
Peter Kenny is a writer for The Thrifty Scot, please visit us at credit cards and Balance Transfer Credit Cards
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