Debit card is a plastic card that allows user to withdraw
cash from financial institutions or purchase items from merchants with the cost
charged directly to his bank account. It is a convenient instrument for a
person to do business or personal activities. It is a paperless bank account on
which a bank issues a card instead of a passbook to its client. Aside from
making deposit to his debit card account, the user can make payment to another person
or institution or receive payment or deposit on his saving account through his
card.
Like ATM card, a debit card can also be used by its holder to
withdraw money from bank’s ATM. A debit card issued by one bank can withdraw money
from another bank’s ATM if both of them are connected with interbank ATM networks
such as Express, MegaLink and BancNet. In
the Philippines, the major electronic fund transfer facilitators are Visa and
MasterCard. Banks that issue debit card carry the brand of those two international
companies on their cards. The Visa or the MasterCard brands and the
connectivity of debit card to bank networks allow the holder to use his debit card
locally or even abroad.
Cashless shopping or payment is the main convenient feature
of debit card in financial transactions. A debit card can be used to pay utilities,
groceries, restaurant or other bills to merchants that accept such form of
payment. A cashier swipes the card in an electronic authorization device at the
point of sale. Sometimes a separate
PINpad to enter the PIN is used. But in some establishments there is no need to
do it.
Both debit and credit cards can be used to shop online. There
are some advantages in buying items online because in some cases they are cheaper
than what can be bought physically at local stores. Manufacturers and merchants
who have large inventories of unsold, overstocked and discontinued items find online
stores as convenient place to sell them off. To attract buyers, these items are
offered for sale at a very huge discount. Since the items are still very usable,
online shoppers are attracted to them because of their low price. Furthermore,
some old and hard to find items at the local stores might only be available online.
And the debit card and credit card may come in handy to acquire those much desired
items. However, the purchase of the debit card holder is limited to the amount of
his bank savings account balance while a credit card holder purchases are
limited to the range of his line of credit. The credit card holder therefore
has more leverage in purchasing online items. He can even buy them in
installment basis with interest.
Using a debit card is in essence a cash transaction while
using a credit card is virtually an acquisition of goods or services on short
term loan. And since credit card purchases may not be backed up with the user’s
bank account, the items are usually charged with interest. Since the debit card
holder spends only what he has in his bank account, there is only little risk
that he may go into an unmanageable debt. On the other hand a credit card holder
may be tempted to go on an uncontrollable shopping spree that may put him in
future dire financial straits.
Almost always, one needs to have money in his possession
since debit or credit card alone won’t be able to pay for anything. But with a
debit card, he may not have to bring along with him huge amount of it. Money
that is lost will be gone forever, while a lost debit card can be replaced with
a new one. The user will just have to report the incident to his bank which
will then deactivate the card to prevent transaction that will be made by unauthorized
persons.
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