The plastic cards in your wallet all look very similar. It is important to know exactly how the different types of cards work, along with their advantages and disadvantages.
Also known as bank cards, debit cards are ‘plastic’. They are the same size as many of the other cards in your wallet or purse and let you spend money without the need to carry cash. Similar to writing a cheque, though, the funds are withdrawn instantly from either your savings or checking account. There are even accounts designed exclusively for shopping online, so in this case there is no physical card involved.
Debit card use has spread like wildfire in many countries around the world and has overtaken the cheque, and in some cases, cash transactions as well. Just like credit cards, debit cards are used to make purchases over the telephone and over the internet, making it easier than ever to spend money that you have, and to also spend money that you do not. If you wish to ‘over draw’ your account, (spend money which is not in the account), then make sure you have your bank’s agreement to do so.
Acting as ATM cards, debit cards can be used to withdraw cash instantly from almost any cash machine. Some business merchants also allow for cash back where you can withdraw money from your account when paying for goods and/or services at their retail outlet.
Debit cards differ from credit cards in that debit cards immediately deduct an amount of money, from your checking account, for example.
A credit card allows you to spend money on credit from the bank where you got the card. Basically, a debit card spends money you have and a credit card spends money you do not have.
Systems accepting debit cards have become popular in video arcades, movie theatres and theme parks. Many people really can manage their financial life without carrying any cash whatever.
Plastic cards can be very easy and convenient to use, but it is important to know exactly which type you are using to keep your accounts in order.
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