Definition of 'Debit Card'

y Definition of 'Debit Card

An electronic card issued by a bank which allows bank clients access to their account to withdraw cash or pay for goods and services. This removes the need for bank clients to go to the bank to remove cash from their account as they can now just go to an ATM or pay electronically at merchant locations. This type of card, as a form of payment, also removes the need for checks as the debit card immediately transfers money from the client's account to the business account.

History of debit card

The history of debit cards is an interesting one. Debit cards helped to change the way that people used money and bank accounts. Debit cards are used to pay for purchases at stores and other locations around the world. A debit card works by debiting the money from your checking account. For many people debit cards have taken the place of cash and checks. However, debit cards are still a relatively new banking tool.

y Credit cards paved the way for debit cards. Many people used credit

cards to pay for transactions. This also put in place the infrastructure that debit cards needed to be practical as a method of payment. Seattle's First National Bank offered the first debit card to business executives in 1978. Initially they were like a check signature or guarantee card, with which the bank would guarantee that the fund would be paid, but you did not need a check to do the transaction. They also required a large savings account be kept at the bank to cover the funds. These cards were only issued to people who had a long and good standing with the bank, because the funds were not directly debited from the account. These types of cards generally come with the Visa or MasterCard symbol on them.

y In 1984 Landmark created the first nationwide debit system, using ATMs and other networks that allowed debit cards to be used nationwide. This allowed the smaller banking systems within states to connect with banks systems outside of states. As technology improved the debit cards moved to a system that was able to directly debit the money from a checking account. When this happened the debit cards became available to more and more consumers. These types of debit cards may have the Plus symbol or other similar symbols on them. However many banks will also use the Visa or MasterCard symbol for a direct debit card because they are accepted at so many different places around the country.

y In 1998 debit card transactions first outnumbered the

use of checks around the world. This number has continued to grow over time. Debit cards are now commonly used for most transactions at stores in the United States. Debit cards are more convenient to use than a check. Debit cards speed up transactions at stores. Additionally debit cards are safer than carrying cash, because banks can stop fraudulent purchases and consumers are not held liable for purchases made when the card is stolen. Debit cards have made banking a much easier process for many people.

Types of debit card:

y There are currently three ways that debit card transactions are processed: online debit (also known as PIN debit), offline debit (also known as signature debit) and the Electronic Purse Card System.One physical card can include the functions of an online debit card, an offline debit card and an electronic purse

card.

Online Debit System

y Online debit cards require electronic authorization of every transaction and

the debits are reflected in the user s account immediately. The transaction may be additionally secured with the personal identification number (PIN) authentication system and some online cards require such authentication for every transaction, essentially becoming enhanced automatic teller machine (ATM) cards. One difficulty in using online debit cards is the necessity of an electronic authorization device at the point of sale (POS) and sometimes also a separate PINpad to enter the PIN, although this is becoming commonplace for all card transactions in many countries. Overall, the online debit card is generally viewed as superior to the offline debit card because of its more secure authentication system and live status, which alleviates problems with processing lag on transactions that may only issue online debit cards. Some on-line debit systems are using the normal authentication processes of Internet banking to provide real-time on-line debit transactions. The most notable of these are Ideal and POLl.

Offline Debit System

y Offline debit cards have the logos of major credit cards (for

example, Visa or MasterCard) or major debit cards (for example, Maestro in the United Kingdomand other countries, but not the United States) and are used at the point of sale like a credit card (with payer's signature). This type of debit card may be subject to a daily limit, and/or a maximum limit equal to the current/checking account balance from which it draws funds. Transactions conducted with offline debit cards require 2 3 days to be reflected on users account balances. y In some countries and with some banks and merchant service organizations, a "credit" or offline debit transaction is without cost to the purchaser beyond the face value of the transaction, while a fee may be charged for a "debit" or online debit transaction (although it is often absorbed by the retailer). Other differences are that online debit purchasers may opt to withdraw cash in addition to the amount of the debit purchase (if the merchant supports that functionality); also, from the merchant's standpoint, the merchant pays lower fees on online debit transaction as compared to "credit" (offline) debit transaction.

Electronic Purse Card System

y Smart-card-based electronic purse systems (in which

value is stored on the card chip, not in an externally recorded account, so that machines accepting the card need no network connectivity) are in use throughout Europe since the mid-1990s, most notably in Germany (Geldkarte), Austria (Quick Wertkarte), the Netherlands (Chipknip), Belgium (Proton), Switzerland (CASH) and France (Mon o, which is usually carried by a debit card). In Austria and Germany, all current bank cards now include electronic purses

Advantages of debit cards

y A consumer who is not credit worthy and may find it difficult or impossible to

obtain a credit card can more easily obtain a debit card, allowing him/her to make plastic transactions. For example, legislation often prevents minors from taking out debt, which includes the use of a credit card, but not online debit card transactions. y For most transactions, a check card can be used to avoid check writing altogether. Check cards debit funds from the user's account on the spot, thereby finalizing the transaction at the time of purchase, and bypassing the requirement to pay a credit card bill at a later date, or to write an insecure check containing the account holder's personal information. y Like credit cards, debit cards are accepted by merchants with less identification and scrutiny than personal checks, thereby making transactions quicker and less intrusive. Unlike personal checks, merchants generally do not believe that a payment via a debit card may be later dishonoured. y Unlike a credit card, which charges higher fees and interest rates when a cash advance is obtained, a debit card may be used to obtain cash from an ATM or a PIN-based transaction at no extra charge, other than a foreign ATM fee.

Disadvantages of debit cards

y Use of a debit card is not usually limited to the existing funds in

the account to which it is linked, most banks allow a certain threshold over the available bank balance which can cause overdraft fees if the user's transaction does not reflect available balance. This disadvantage has lessened in the United States with the requirement that an issuer obtain opt-in permission in advance to allow an overdraft on a debit card. Lacking this opt-in, overdrafts are not permitted for electronic transactions.

y Many banks are now charging over-limit fees or non-sufficient

funds fees based upon pre-authorizations, and even attempted but refused transactions by the merchant (some of which may be unknown until later discovery by account holder).

y Many merchants mistakenly believe that amounts owed can be "taken" from a customer's account after a debit card (or number) has been presented, without agreement as to date, payee name, amount and currency, thus causing penalty fees for overdrafts, over-the-limit, amounts not available causing further rejections or overdrafts, and rejected transactions by some banks.

y Many merchants mistakenly believe that amounts owed can be

"taken" from a customer's account after a debit card (or number) has been presented, without agreement as to date, payee name, amount and currency, thus causing penalty fees for overdrafts, over-the-limit, amounts not available causing further rejections or overdrafts, and rejected transactions by some banks. y In some countries debit cards offer lower levels of security protection than credit cards.[6] Theft of the users PIN using skimming devices can be accomplished much easier with a PIN input than with a signature-based credit transaction. However, theft of users' PIN codes using skimming devices can be equally easily accomplished with a debit transaction PIN input, as with a credit transaction PIN input, and theft using a signature-based credit transaction is equally easy as theft using a signature-based debit transaction.

y In many places, laws protect the consumer from fraud much less

than with a credit card. While the holder of a credit card is legally responsible for only a minimal amount of a fraudulent transaction made with a credit card, which is often waived by the bank, the consumer may be held liable for hundreds of dollars, or even the entire value of fraudulent debit transactions. Because debit cards allow funds to be immediately transferred from an account when making a purchase, the consumer also has a shorter time (usually just two days) to report such fraud to the bank in order to be eligible for such a waiver with a debit card and recover the lost funds,[6] whereas with a credit card, this time may be up to 60 days, and the transactions are removed without losing any credit. A thief who obtains or clones a debit card along with its PIN may be able to clean out the consumer's bank account, and the consumer will have no recourse.

India
y The debit card has limited popularity in India as the merchant is

charged for each transaction. The debit card therefore is mostly used for ATM transactions. Most of the banks issue VISA debit cards, while some banks (like SBI and Citibank India) issue Maestro cards. The debit card transactions are routed through the VISA or MasterCard networks rather than directly via the issuing bank. y The National Payments Corporation of India (NPCI) is introducing a payment network and debit card dubbed 'India card'. The Reserve Bank of India is expecting this system will gradually replace the overseas run networks from Visa and MaterCard for Indian ATM, debit and credit card services.[21] y The National Payments Corporation of India (NPCI) has formally decided the name and logo of this new international payment gateway. The new name is being called RuPay.

Debit Card Study

y Unlike credit cards, debit cards turn to be a convenient mean for

a card's holder to provide the financial operations via reducing monetary active funds. To many consumers the cash debit card is a chance to control expenses and reduce debts.

In current economic times, trends are showing consumers prefer a debit card or prepaid credit card over traditional credit cards as they express the desire to use the money they have already earned, hence the debit usage had skyrocketed. Debit cards can be a useful alternative to using credit, but be aware of any and all fees associated with carrying and using these cards. Prepaid cards are also an alternative to look into as they essentially act as debit cards.

y There might be no troubles or difficulties to start the debit card

account unlike it could happen with opting for the credit card. You are not required to possess positive credit history, to have regular income, to provide a pile of the documents which prove your financial abilities or to give away something as collateral. Risks are minimal, but benefits are quite evident. To apply for debit card you should provide the bank with your driver's license, or birth certificate, or social security number.

The debit card services are offered by some establishments. Everything depends on the debit card type you are planning to obtain. First, you may receive the free debit card along with your credit card right at the bank you got the account at. Free debit card gives an opportunity to escape the list of fees along with numerous opportunities all over the world.

y Second, it's possible to get the prepaid debit card right at the bank. This

type of card allows using only money loaded onto the account in any corner of the world.

Third, reloadable debit cards are still available at any bank and/or retail sellers. To get this type of card you should give an application either offline or online. It's hard to imagine more convenient way to use the bank debit card services than the debit cards online. You may pay with your online debit card even quicker from your home. As for the protection issue, in order to cancel transaction you just should give a call to the debit card issuer or receive the call from the bank since they used to verify every money transaction. As the transaction is proved by specifying your PIN instead of the hand written approval it stays to be safe.

y The credit card holder should pay off the debt monthly or to pay the interest for

using the credit card merits, while the debit card's holder is to pay one-time fee for registration or even any of it. Concerning other fees, there are transfer fees, but they may be easily escaped if you pay with the debit card instead of withdrawing cash. Some banks used to charge some interest on the rest of the sum. If you still want to benefit from both debit and credit funds, there is a chance to become a two cards' holder. Regarding the debit card opportunities, they are as following: debit cards allow accumulating money in a safe manner; it's possible to book hotels and hire vehicles all over the world; purchases in the online and offline stores become much easier and quicker; no declaration is needed on traveling overseas; there's a chance to duplicate the debit card to gift any representative; on losing the card or forgetting the PIN one can contact the support 24/7; one is able to check balance and transfers electronically or in person.

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y Well, there are many types of the bank cards. It's your

choice. The major condition is to meet your abilities and needs. For sure, that's easy since there are enough occasions to educate yourself.