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*DEBIT CARD

*)INTRODUCTION

A debit card (also known as a bank card or check card) is a  plastic  payment card that providesthe cardholder electronic access to his or her   bank account(s) at a financial institution. Some

cards may bear a stored value with which a payment is made, while most relay a message to the

cardholder's bank to withdraw funds from a payer's designated bank account. The card, whereaccepted, can be used instead of  cash when making purchases. In some cases, the  primary

account number  is assigned exclusively for use on the Internet and there is no physical card.

In many countries, the use of debit cards has become so widespread that their volume has

overtaken or entirely replaced cheques and, in some instances, cash transactions. The

development of debit cards, unlike credit cards and charge cards, has generally been country

specific resulting in a number of different systems around the world, which were oftenincompatible. Since the mid-2000s, a number of initiatives have allowed debit cards issued in

one country to be used in other countries and allowed their use for internet and phone purchases.

Unlike credit and charge cards, payments using a debit card are immediately transferred from

the cardholder's designated bank account, instead of them paying the money back at a later date.

Debit cards usually also allow for instant withdrawal of cash, acting as the ATM card for

withdrawing cash. Merchants may also offer  cashback  facilities to customers, where a customer

can withdraw cash along with their purchase

*MEANING

Following ten important points overall explain the meaning of debit card:

1.  Debit card is a synthetic card, and its body is mainly of a laminated plastic sheet. Some

other materials like a magnetic stripe, a microchip, paints, a hologram, gelatine, etc., are

also used in its making.2.  Generally, bank issues a debit card to those customers who have applied for it, while

submitting their account opening form.

3.  It entitles (gives usage rights to) a customer to use it as a mode of payment for buying

goods and/or getting services.4.  It allows utilization of  money only within or equal to the amount of funds available in the

respective bank accounts (like saving, current, and others) of a debit cardholder.

5.  It gives debit cardholder a suitable choice (option) for making payment of his purchasedgoods and/or services without a need to carry and handle cash (i.e. currency notes, coins,

etc.).

6.  It also acts as an ATM card which can be used in Automated Teller Machines towithdraw and/or deposit the cash.

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7.  It enables the bank account of a debit cardholder to be automatically and instantaneously

debited up to the extent of a purchase amount.

8.  It looks almost like a credit card. However, in case of a debit card, money can bewithdrawn only from a respective bank account of the debit cardholder. Here, no interest

is charged on money withdrawals.

9. 

Unlike a credit card, interest is not charged on the withdrawals of a debit card. It is so,since no money is borrowed from a bank else one's own money is withdrawn.10. A debit card is a type of prepaid card, which helps you to control your expenditure

(spending) of money.

Definition of 'Debit Card'

An electronic card issued by a bank which allows bank clients access to their account to withdrawcash 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 merchantlocations. 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.

BENEFITS & FEATURES OF DEBIT CARDS

*)BENEFITS OF THE DEBIT CARD

1)FREE WITH OUR BANK ACCOUNTObt a i n i ng a deb i t ca r d i s eas y . I f we qua l i f y t o open a bank accoun t ,

we usually get a debit card, if our bank offers the service.• 

2)NO BACKGROUND CHECKWhen we are appl ying for a debit card , the ban does not need to look into our credit

history. All we need is the documentation to open a bank, account,and money in our bank when

we use our debit card.• 

3)CASH WITHDRAWALS

The customer can withdraw a minimum of Rs. 100/- and a maximum Rs.10,000/- per day• 4)CONVENIENCEA Debit card fees us from carrying a lot of cash or a cheque book. In case,we are aninternational traveler, we don’t need  to stock up on Traveler’sCheques or cash. We

can use our debit card to withdraw Cash from over

500,000 ATMs around the world in over 100 countries. We can withdraw inthe loca l currencyof the country we are in, limited only by the money wehave back home in our

account, and Business Travel Quota (BTQ) limitarability.• 

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5)FAIR EXCHANGEIf we return merchandise or cancel services paid for with a Debit card, thetransaction is

treated as if it were made with cash or a check. Customersusually get cash back for

offline purchases; for on-line transactions, theamount is credited to our account.• 

6)STATEMENT OF ACCOUNTA statement of transactions can be obtained from the customer’s branch. For  example, a mini

statement containing the last four transactions and balancecan be obtained at a State

Bank Gr oup dur i ng t he wor k i ng hour s o f t he customer’s branch.• 

7)BANKING CUM SHPPING CARDYour Debit card can be used as ATM card at any ATM across the world, aswell as for making

 purchase at merchant locations. You can also withdrawcash from any of the 12000 ATMs in

India.WIDELY ACCEPTED, INTERNATIONALLY VALID *)Process Debit Card TransactionsA successful business will usually accept debit cards as a part of their overall profi le of payment so lu tions . If you don’ t pr ocess debit cards, youmay not be tak ing ful l

adv anta ge of a l l t he p ote nt i al t hat you r me rch ant account can del iver. There

are essentially two ways you can accept debitcards, online and offline.Off line debit card transactions

An of f l ine debi t card t r ansac t ion i s s t i l l t he way mos t merchant saccept

debit cards. This is essentially the same as processing credit cards.You swipe yourcustomer’s debit card through a credit card terminal and have them sign the receipt.If

you choose to accept debit cards offline, be sure that the debit cardh a s a

VISAorMasterCard

logo. Otherwise, the debit card won’t beapproved and you won’t be able to process

the debit card offline

*)Online debit card transactionsThe most advantageous way to process debit cards is to do it online.You will still be

able to accept debit cards at the point of sale, but you willneed to install a PIN pad on your credit

card terminal.A n o n l i n e d e b i t c a r d t r a n s a c t i o n w o r k s m u c h l i k e a

c r e d i t c a r d transaction, except that after your customer swipes his or her debit card, theywill

enter a PIN instead of signing the receipt.A t t h i s p o i n t t h e e n c r y p t e d d e b i t c a r d

i n f o r m a t i o n i s s e n t t o t h e customer’s bank for authorization, and you’llreceive the funds just as youwould for a credit card transaction.Your business has many

advantages when you accept debit cards.For example, you pay a flat f ee for each debit

card transaction thatyou process, instead the flat fee plus percentage rate that you

are chargedwhen you accept credit cards. Over time, this can potentially save you a loto f

m o n e y Another advantage when you process debit cards is that you can’t becharged higher

“downgrade” fees.In a credit card transaction, you are usually charged the

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“di scount ra te .” However , some t r ansact ions are cons idered to be a h igher

r i sk o r expense to the bank, and you are charged a higher rate as a result.But when you

accept d ebit cards, you always pay t he same flat rate, with no danger of the rate

increasing.You can also cut down on checkout time when you accept debit cards.It takes an

average of 30 seconds to hand over the pen, wait for the customer to sign the receipt, and then

take the pen back. if you process 20 credit card transactions a day, you’re lo sing 100 minutes

a day just passing a pen back and forth! That’s almost two hours. 

*Advantages of Debit Cards?

A debit card is linked to a specific bank account from which withdrawals are taken whenever

 payments or cashpoint transactions are made. No line of credit is given (unless the user has an

overdraft) and spending will be debited virtually immediately. The benefits of these cards

include:

 

Multiple functions: Most debit cards can be used to withdraw cash and to make purchases, both in stores and online/by phone. They can also double up as chequeguarantee cards and as a way of getting cash back   in certain stores. This makes them

versatile as they give easy access to the money  stored in your bank account.

  Security: Using a card instead of carrying cash makes some consumers feel safer. If youlost a card or had it stolen, then you won't necessarily lose any money . Cards are PIN

 protected and, provided the user keeps their security number a secret, are harder to use

for spending than cash.

  Budgeting and debt: Transactions are generally paid for with money you already have inyour bank account. This can make it a lot easier to budget and to avoid getting into debt

 by overspending or using credit.

 

Processing costs: Some e-tailers will charge a processing fee when you buy certain goodsand services online. They may not, however, add this charge if you pay by debit card.

Although there are advantages to using debit cards, there are some drawbacks that also need to be considered.

*Disadvantages of Debit Cards?

Debit card use may be convenient, but this may not always be the best way to pay. Some of the

downsides include:

  Restricted spending: Withdrawals and payments made with a debit card are generally

checked against available funds in the connected bank account. If you try to buy

something that costs more than you have to spend, your transaction may not be approved.

  Unchecked approvals: On the other hand, not all debit card systems will check a balance before authorising a payment. Some may process a transaction automatically, which

could see you go overdrawn without realising it.

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  Online payment protection: Consumers are given automatic payment protection when

they shop online with a credit card but this may not apply to debit cards. You may not be

given help to get your money back unless your card issuer has a chargeback scheme andthis may not be valid for larger value purchases.

It may also be worth considering how debit card usage compares to other payment solutions,such as credit cards.

Is a Debit Card Better Than a Credit Card?

Most people find that using a debit card is better for everyday purchases that will be funded from

their monthly income. It may be harder to afford to pay for big-ticket items and to stick to budget

at the same time. On the other hand, some prefer to use credit cards more regularly because ofthe interest free period they give. Bear in mind that this only really works if you pay off your

credit card in full every month, otherwise you will be charged interest on your borrowing.

If you are looking to make a larger purchase, then it may be advisable to use a credit card if youthink that you might need payment protection. The Consumer Credit Act of 1974 (Section 75)

gives cover for purchases between £100 and £30,000 made on credit cards but not on debit orcharge cards so this may influence which card you should use in certain circumstances.

*Types of Debit Cards

Debit cards are available to fit a variety of  financial  needs and lifestyles. Whether you are a

recent grad, or a more established consumer with a mortgage and other commitments, debit

cards give you safe and convenient way to make payments or get cash. 

Here’s a quick peek at the world of debit cards. 

PIN-only cards

PIN-only debit cards are linked to your bank or credit union account. You can use a PIN-onlycard to get cash from an ATM, make deposits, transfer  funds   between accounts, buy goods or

services from retailers and pay certain bills online or by phone. When you use a PIN-enabled

debit card, you enter your PIN at the ATM or retail location –  a step that verifies your identity

and increases the security of the transaction.

Dual-use cards

Dual-use debit cards are both signature- and PIN-enabled, and are tied directly to your  financial institution account. So if you are in a restaurant or clothing store, you can choose to authorize

a purchase by entering your PIN or by signing a receipt. Dual-use debit cards also can be used to

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make some payments online or over the phone. They are great for ordering take out, buying

tickets, even paying regular monthly bills. Enter your PIN to get cash or manage your accounts.

EBT cards

Electronic Benefits Transfer (EBT) cards are provided by many state or federal governmentagencies to people who qualify for cash payments, food stamps or other benefits. Depending on

the type of government program, an EBT card may be used to make purchases at participating

retailers or to withdraw cash from an ATM. 

Prepaid cards

Prepaid cards are not associated with any specific account, but instead provide access to funds  

deposited directly on the card by you or a third party –  like a store, friend or family member.

When you make a purchase with a prepaid card, funds are taken directly from the actual balanceon the card. Of course, you can spend only the amount of  money  stored on the card.

Examples of prepaid cards include:

  Gift cards from a bookstore, department store or online retailer

  Family or personal spending cards

  Travel cards

  Flexible spending or health savings cards

  Payroll cards from an employer