The Ultimate Debit Card Guide

Posted by  Fintra , updated 2021-06-03

While shuffling through the various cards in your wallet, hunting for a card to complete a purchase, suddenly you find yourself pondering which card to use- a debit card or a credit card. If you’re absolutely a newcomer into this world of plastic money, this confusion can be as hard as resolving an algebra equation! One might think both are a form of plastic cash after all! 

Pondering what is a debit card and how it’s different than a regular credit card? In simple terms, debit cards blend the functions of an ATM card and a credit card. They enable the cardholders to access the cash from their bank accounts instantly. Debit cards are popularly known as easily approachable plastic cash that offers access electronically to our savings account in any bank via ATMs or card swipes. They function similarly to credit cards, with the major difference being the fact that the amount gets directly and instantly deducted from the cardholder’s account instead of the money being paid by them at a later date.

In this blog, Fintra will journey you into the world of debit cards by highlighting the following topics:

1. What Is a Debit Card?
2. Types of Debit Cards
3. The Dos and Don’ts of Debit Card
4. How Does a Debit Card Work?
5. What Are the Fees and Charges Associated with Debit Cards?
6. What is the Difference Between Debit Cards and Credit Cards?
7. How to Prevent Debit Card Frauds?
8. How to Get a Debit Card?
9. How to Use a Debit Card?

What Is a Debit Card?

 Various banks issue debit cards, and they are like ATM card with the functionality of a credit card. A debit card is a payment card that enables one to make secure and easy transactions online and in-person by drawing money directly from the individual’s checking/savings account. In other words, the individual is not borrowing funds from a line of credit as it would have with a credit card; the money on the debit card belongs to the individual. One can also use this card to access its cash at ATMs. Along with cash registers and ATMs, these cards also work with mobile payment platforms such as Samsung Pay, Apple Pay, and Google Pay, as well as with many other money transfer apps. 

Some other names used for debit cards are cash cards, bank cards, or check cards. Due to the widespread usage in the globe, a debit card issued from one country is mostly valid to be used in another country. Debit cards can be used for making payments for purchases done over the internet or phone. The chief four issuers of debit cards are American Express, Discover Card, Master Card, and Visa. Apart from these four issuers, some countries might have their country-specific debit cards that could be popular in those countries along with a few more. Some examples of the country-specific debit card issuers would be RuPay in India, UnionPay in China, and Maestro in the United Kingdom.

Types of Debit Cards

In India, debit cards have various variants. They are usually classified based on the technology used, based on payment platform, and based on usage. Following is a brief description of each category:

1. Based on Technology used

A. Contactless Debit Card- These cards use the technology of radio frequency identification (RFID) or near field communication (NFC) secure transactions. Just by a tap transactions through these cards are done.

B. Magnetic Stripe Debit Card- Such types of cards use the technology of tiny iron-based particles on a magnetic band. Known as a swipe card, such cards can be swiped past a magnetic reading head for any transaction.

C. Chip and Pin Debit Card- This debit card uses a more evolved version of the technology. It is inbuilt with a chip that stores and transacts data in an encrypted format. Each transaction made via this requires a PIN (Personal Identification Number).

2. Based on Usage

A. Prepaid Debit Card- These types of cards unlike other debit cards aren’t linked to an individual’s account. To use this card, one needs to pay in advance and load the funds into its card. Later on, the person can use the funds in it. One of the most common forms of the prepaid debit card is the Forex (Foreign Exchange) Card, it is a convenient way to carry and spend funds overseas.

B. International Debit Card- The International Prepaid Debit Card is a debit card that can be used overseas to perform transactions and withdraw funds at international bank ATMs. Sometimes an extra charge, Foreign Exchange Markup, will be added to the total transaction value. This markup might be up to 3.5% of the transaction amount. Additional charges may arise when withdrawing foreign currency overseas using the debit card.

C. Virtual Debit Card- Such cards are not physical debit cards, they are accessed via phone or internet for doing online payments, but that too only once.

D. Business Debit Card- Business Debit Cards are only issued to corporate people for uses pertaining to business purposes.

3. Based on Payment Platform

A. Visa Debit Card- This is a debit card issued by Visa, a payment platform based out of North America. Such cards provide a Verified by Visa (VbV) platform for online transactions.

B. Visa Electron Debit Card- A sister card to Visa debit card. Visa Electron Debit Card's distinguishing feature is the fact that funds are needed to be available in the account at the time of payment since there is no overdraft limit.

C. Maestro Debit Card- Popularly known as the worldwide trademark of master card that requires debit card PIN for making any transaction.

D. Master Debit Card- Master Debit Card is a type of card that provides secured and convenient access to funds. It comes in two types- Cirrus Debit Card and Maestro Debit Card. 

E. RuPay Debit Card- Launched under the domestic card scheme of National Payments Corporation of India (NPCI), RuPay Debit Card supports online transactions and payments over the discover network.

Besides the above, debit cards are allotted by the name of metals like Gold Debit Cards, Titanium Debit Cards, or Platinum Debit Cards. Such cards have nothing to do with the metal in particular, but they are named after them due to the benefits they offer to the cardholder. These benefits may vary from company to company and bank to bank.

The Dos and Don’ts of Debit Card

Following are some guidelines on how to take care of debit cards:

The DOs

• If the card gets lost immediately report about it-Whenever you lose your debit card, immediately report it to the bank or financial institution so they can do the needful and try to prevent the fraud from occurring. 
• Keep tracking your emails- Regularly checking your emails will enable you to discover any fraudulent transactions that might have happened through your debit card. Whenever a transaction is done with the card, an email gets generated to intimate the cardholder, informing about the transaction. 
• Authenticate each transaction- Make sure to follow RBI mandated authentication norms for every PoS (Point of Sale) transaction done by the card by entering its PIN or providing signatures to complete the entire transaction. 
• Follow SMS alerts- Inform your bank to set up and receive SMS alerts that list details of each transaction made on any of the purchases using your card. By doing this, it'll enable you to track your debit card spending.
• Keep an eye on your funds- It’s strongly advised to regularly check the account statements for tracking well about how much and where have you been spending. If any unauthorized or irrelevant transactions are noticed, report them immediately to the bank or the financial institution to prevent from becoming a victim of any fraudulent transaction.

The DON’Ts

1. Don’t disclose the Debit Card PIN- The Debit Card PIN (Personal Identification Number) should be kept as a secret, only the cardholder must know it. It shouldn't share the PIN over social media, phone, email, or any such online/offline platforms. Memorize the 4-digit code and never write it on any medium whatsoever.
2. Don’t use unsafe online platforms- In today’s world, cybersecurity is becoming a major concern. Although there’s a range of options for online shopping, cyber safety isn’t guaranteed by each payment portal. Therefore, be extremely cautious while using the debit card for making any online payment. Use portals consisting the secure online payment symbols, and websites that require the authentic 2 step verification process. This prevents the leaking of debit card credentials to unreliable sources.
3. Don’t cause any physical damage to the Debit Card- The magnetic stripe or the chip presented in the debit card can get destroyed if it’s exposed to sharp objects or magnetic materials. Any physical damage caused due to such acts will make your debit card a useless piece of plastic.  Even close contact with electronics such as mobile phone will also pose damage to the debit card. Hence, preventive measures should be followed to keep the debit card safe and secure.

How Does a Debit Card Work?

In general, debit cards usually partner with the major credit card brands, such as American Express, Discover Card, Master Card, and Visa, to allow an individual to use its debit card for making payments anywhere those branded cards are accepted.

While using debit cards for an in-person purchase, the cardholder will have to either swipe it, insert it, or use contactless pay at the card terminal just like the credit cards. The holder will then be asked to enter their debit card PIN into the machine, although some merchants do allow to use the debit card without a PIN. The PIN is a security measure that verifies the person's identity. Do note when making any payment for a purchase, the funds get directly pulled from the cardholder's savings/checking account. Once the bank verifies that the cardholder has the funds to make the purchase, its transaction will be approved. One can glance at the bank statement to note if the purchase is done or it’s still pending. If the transaction appears as pending, it means the bank hasn’t transferred the funds to the merchant, although the cardholder's account is been debited. As soon as the bank transfers the funds to the merchant, the transaction will appear as approved.

While using the debit card to pay for a purchase or withdraw funds from an ATM, one can complete their transaction because it already has the funds necessary in its linked account. Moreover, depending on each individual’s bank, the bank may provide the individual with the facility of overdraft their account by a certain number of Rupees if it has the additional funds available in a backup account, such as a savings account. However, to spend money using the debit card, the required money must be presented in the cardholder's account. 

What Are the Fees and Charges Associated with Debit Cards?

Usually, debit cards won’t typically have fees or charges for using them every day, but some debit transactions do carry fees, though a few of them often can be avoidable. For example, some fees might be applied for using an ATM outside the bank’s network or using the debit card in another country.

These charges will vary from bank to bank, but the following are a few fees and charges associated with debit cards that most of the banks levy:

• Overdraft fees: If a cardholder overdraft its account with a purchase, it may incur a fee.
• Out-of-network ATM fees: These fees apply if a cardholder uses an ATM that isn’t in its bank’s network. 
• Account holds: If a cardholder uses its debit card to rent a hotel room or a car, it might have a “hold” placed on its card for more than the value of the transaction. This hold will decrease the cardholder’s available account balance until the hold falls off its account.
• Annual Maintenance Fee: There’s a yearly fee charged for debit card usage, and it usually ranges from Rs 100 to Rs 500. At times the range varies as per the policies of different banks.
• Card replacement Fee: When replacing a debit card with a new one, a fee will be applicable. Some banks don’t charge a fee if there’s physical damage to the card, but a fee will be charged if the card gets lost. Some banks will charge a fee if the debit card is physically damaged and lost.
• Duplicate PIN or regeneration of PIN Fee: If the cardholder forgets its PIN, the duplicate PIN will be sent to the individual’s address by charging a nominal fee.
• Domestic Transaction Charges: Some banks have different policies for levying charges based on the number of transactions done with the card. For example, transactions made on the same bank’s ATM will usually be free, however. A certain limit per month will be defined for free transactions from another bank’s ATM. A nominal charge per transaction will be levied in such cases. 
• International Transaction Charges: Charges for cross-currency markup, debit card balance check, and cash withdrawals using the debit card in foreign countries are at times levied for every transaction. These charges might be percentage based or a flat transaction fee.
• Personalization Fee: Some banks offer the exclusive feature of placing the cardholder’s photograph on the Debit Card by charging a nominal personalization fee. Such cards are known as Personalized Debit Card.
• POS Fee: There is no extra fee charged for making purchases through the debit card. However, sometimes for fuel transactions, there’ll be an extra surcharge at the rate of a certain percentage levied.

What is the Difference Between Debit Cards and Credit Cards?

Debit Cards and Credit Cards resemble each other in appearance: both have a unique 16- digit card number, month and year of expiry, and a 3-digit CVV (Card Verification Value) number on the back of the card. However, the features of both along with their usage pattern do vary drastically.

Following is a brief description of how both differ from one another:

• Debit cards directly are linked to the bank account of the user. The funds required for the debit card transactions get directly debited from the cardholder’s bank account that is linked to the debit card. The bank decides on the limit of maximum withdrawal or purchase per day that can be done on the card.
• On the other hand, credit cards are a line of credit provided by banks. They are linked to the credit card account which features a pre-defined limit. Such cards are issued by banks based on the eligibility and credit history of the applicant. Once the user swipes the card, the bank will pay the amount to the vendor, and the debits are added to the cardholder’s account. Later on, the cardholder has to repay that amount to the bank within a stipulated time period. 
• Credit card offers borrowed money that one has to pay back in total at the end of its statement period. In the case of a debit card, it is not permissible for the individual to use funds that are not available in its account.
• Speaking about the costs, perks, and protections offered by both these cards, they will vary according to the bank policies. For example, credit cards are generally known to provide more benefits and rewards when compared to debit cards. However, credit cards are a preferable choice for people who have good financial discipline. For those who are likely to use cards without proper planning for repayment or who are impulsive shopaholics, then debit cards will be a better option to prevent such people from spending beyond their means.
• When encountering fraudulent transactions, the risks involved in the case of debit cards is comparatively less. This is so because, with debit cards, the funds in the account are at stake, but in the case of credit cards, the user’s potential liability is based on its entire credit limit. However, even debit card frauds can drain the individual’s account balance and pose greater harm to its finances.
• Various banks provide better than minimum protection at their levels for credit cards and debit cards. Besides this, there are also Card Protection Plans offered which ensures quick actions against any sort of fraudulent transactions.

How to Prevent Debit Card Frauds?

Whenever your debit card gets lost or stolen, stay calm and don’t panic. Cards do tend to get misplaced and stolen every now and then. The first thing to do in such a situation is immediately to contact your bank and inform them about the card. Some banks allow you to report the loss online through their online banking portal, and some banks will require you to call them. Depending on how critical is the situation, some banks will freeze the debit card until you’ve found it, and at other times, banks will immediately deactivate that card and send the cardholder a new debit card. Do note reporting the loss or stolen of the card promptly is essential because it will reduce your liability for any fraudulent charges.

Following are some other precautions to take for preventing debit card frauds:

• Avoid using unauthentic or unknown online portals for making payments unless you are extremely sure that they’re genuine and authenticated.
• Avoid using the card reading instruments, which look damaged, mismatched, or appear to have an ill-fitting at any publicly accessible kiosks placed outdoor. Such kiosks might have hidden skimmers that can leak your debit card credentials to unauthorized sources.
• Be cautious while giving your cards to someone, especially if it leaves your sight. For example, when giving the card to a waiter/waitress at a restaurant, keep an eye on the time they take to get it back to you. 
• In most cases, it is advised to frequently use a debit card, which is linked into a separate account having a limited amount of funds meant exclusively for debit transactions.

How to Get a Debit Card?

Whenever opening a saving or checking account, the financial institution will automatically issue a debit card for free. At times you can request for availing one with your account. Later on, to activate the card, you'll be required to follow the instructions received by the bank and set up its PIN for ATM use and purchases. Users who don’t have access to bank accounts can opt for a prepaid debit card that enables them to make purchases. If seeking to build credit, then opting for a secured credit card will be a better option. One can apply for a debit card online or offline. Nowadays, it may not be required to apply for a debit card because it is readily offered while opening a new savings account.   

How to Use a Debit Card?

Using Debit Card At ATM

1. According to the kind of technology used, either swipe the debit card or insert it into the machine.
2. Follow the instructions displayed on the screen:

• Choose the preferred language.
• Choose the type of account you own.
• Select the kind of service you wish to proceed with such as withdrawal, mini statement, or balance inquiry
• Enter the 4-digit PIN (Personal Identification Number).
• If you’re doing cash withdrawal, enter the amount you desire to withdraw and then proceed.
• Complete the entire procedure.
• When done with your transaction, do make sure to collect the cash and the debit card.

Using Debit Card At POS (Point-of-sale)

• Hand over your card to be inserted or swiped into the card reader machine.
• Post this the POS operator will enter the transaction details that include the payable amount.
• Then, you will be required to enter the 4-digit PIN (Personal Identification Number) for authenticating the transaction.
• After this hit enter and wait for the payment slip to be generated. If required, do sign it and keep its copy with yourself.

Using Debit Card Online

• When you’re on an authentic online portal, feed-in the required details like your unique 16-digit card number, date of expiry, name of cardholder, and CVV (Card Verification Value) number.
• Later on, you will be directed to another page if all the above details are valid. On this new page, enter your PIN or the unique password you have set for authenticating online payments. At times you may have to enter an OTP (One Time Password) that’s generated for this particular transaction, and it will be sent to your registered mobile number or Email.  

Conclusion

In short, like credit cards, debit cards also offer the flexibility of paying with a plastic card instead of writing checks, both online and in person. It’s strongly advised and vital to match the cards presented in your wallet with your spending habits. Thus, compare the various credit cards, debit cards, and prepaid cards being available in the market before settling on one. One or a combination of the three can enable you to gain the flexibility you’re craving with the seamless access to the cash required to fulfil your daily activities. Recognizing what a debit card provides in terms of convenience and how it works will enable you to pick the correct card that suits your needs, and you must use it responsibly.