Even though debit cards have become widely used, many people are unfamiliar with them. They look like credit cards, but function like cash or personal checks. When you use a debit card for a transaction, the money is quickly taken from the checking or savings account that the debit card is linked to.
Debit cards can function in two ways – like an ATM card for immediate withdrawals of cash from an account or like a check when buying something. The money used to pay for the transaction is usually deducted from your account within one or two days.
Advantages of a Debit Card
- Easy to obtain. Since you are not applying for credit, once you open an account, a debit card is typically included.
- Convenience. Unlike a check, when using a debit card for a purchase, personal identification is usually not needed.
- Safety. You don’t have to carry cash or a checkbook. And, your debit card requires a PIN (Personal Identification Number).
- Readily accepted. When out of town or the country, debit cards are usually more widely accepted than an out of town check.
Disadvantages of a Debit Card
- No grace period. Unlike a credit card, money for debit card transactions is immediately or quickly deducted from your account.
- Check book balancing. Balancing your account can be difficult unless you record every debit card transaction. You can also monitor your spending through Online Banking.
- Guard your debit card against loss or theft. Keep it in a safe place just like cash, credit cards or checks.
- If you lose your debit card, notify your financial institution immediately.
- Choose a PIN number that only you know. Don’t use your phone number or birthday.
- Guard your PIN number. Memorize it and never write it on your card.
- Keep receipts from all your debit card transactions and keep track of your spending.
- Review your statements immediately and investigate any unknown transactions.