Debit cards are one of the most convenient ways for cashless transactions. You can use these plastic cards at both retail and online stores to buy groceries or other items. The best use of this card is when you need some cash to head to the nearest ATM and withdraw it. But there are some downsides to it you must know before you apply for one. Being aware of both the advantages and Disadvantages of Debit Cards makes you a smart consumer eventually.
ATM cards are both protected by an electronic chip and user-end PIN. You can use your debit card in multiple ways, where cash withdrawal and online payments are two of its common uses. Most transactions carry out instantly, while in some cases, they may take a couple of days to clear, depending on the vendor type.
Many customers prefer using debit cards instead of credit cards for several reasons. Overpowering the limitations of credit cards, here are some benefits of Debit Cards you can have.
Unlike credit cards, you don’t have to maintain your credit score. Even if you have a bad credit score, you can apply for a new debit card by filling a consumer form and submitting it to your bank. Most banks issue debit cards to users as soon as they apply for a checking account.
A credit card may not be accepted everywhere; you’ll have to have some cash to buy services at some places. An ATM Card works in two ways as you have the freedom to withdraw cash as per your need. You can also use it for instant payments just by swiping through the POS machine and buy groceries.
Carrying a debit card ensures triple security for consumers. Since you don’t have to carry cash on you all the time, there is no chance someone will rob you. Also, a debit card is PIN-protected which is accessible to the owner. The chip-based ATM cards are not as vulnerable to hacking as their predecessors (Magnetic stripe cards). Worst case scenario, if some misuses a debit card owned by you, you can report it to the appropriate authority and roll back the transaction.
You can use a debit card internationally, which is a notable advantage of having a debit card. The most common card merchants these days are VISA and Maestro. Having any of these debit card types, you can purchase, pay your bills, or even book a flight ticket and hotel rooms abroad.
With a prepaid debit card in your hand, you get to control your expenses as you cannot spend more than you have in your account. This helps you avoid fees associated with debit and credit cards (late payments, etc.). This advantage of a debit card makes this type of financial service a perfect method to handle your budget.
As there are advantages, so are the disadvantages of Debit Cards usage you need to be familiar with. As a careful consumer, you need to be aware of the following potential limitations of debit card use.
Banks charge consumers with processing fee on every transaction. These charges may seem negligible to you, but the deducted amount can be surprising when considered as a whole. If you use your ATM cum-debit card at an ATM not affiliated with your bank, it will cost you more. Adding the annual maintenance fee and charges for SMS alerts/online banking would be more troubling.
Since having a Debit card has nothing to do with your credit score, having loads of balance in your checking account won’t help the damaged credit. By building your credit score, you’ll have access to lower interest rates when borrowing and increased credit limits. A credit card, on the other side, is a great tool to improve your credit score.
If you own a debit card, you might not feel as privileged as a credit card owner. In most cases, the issuing banks limit the maximum withdrawal amount, and that’s applicable for both cash and online transfer. This issue, at times, can be one of the leading disadvantages of a debit card, if you’re away from your bank and the value of the amount required is considerably high.
Credit/debit card fraud is everywhere and surprisingly, no one can stop it even after putting the top-level security methods in place. The personal Identification Number (PIN) cannot give protection against identity theft. Anyone carrying the card can access the account if they know your Debit card PIN. Most cybercriminals need your card details to get access to your bank account. Other than that, a recent spike in ATM frauds and attacks during the pandemic in Europe has raised the alarm of their use and ATM establishments.
Where it’s for cybercriminals to misuse your debit card online, even in case you notice it happening, it’s a lengthy process to get the lost money. You’ll have to report the incident to the bank. You are obligated to go through the inquiry process and explain the circumstances under which it happened.
The process may take even days to resolve; the only way to retrieve the money is when the bank believes it’s a genuine fraud case.
Debit cards can be an invaluable asset when you need to pay for goods and services online. Also, you can put this plastic card to pay your pending bills on the go. Keeping in mind these Advantages and Disadvantages of the Debit Cards, you can make sure your asset is safe from the possible threats looming around. Whenever you purchase goods from e-commerce websites, make sure you don’t leave any trace of your card details.
There are several disadvantages of using a debit card: You can't use it with a credit account. Your bank account is linked to your debit card. It's easier to commit fraud when you use your debit card illegally.
A bank or credit union gives customers a debit card in their checking account. It enables them to draw funds out of their account, either entirely or in parts.
Is Credit Card Debt Bad or Good? Credit cards are neither good nor bad. They're simply financial gadgets that must be handled with caution. Running up debt, failing to pay on time, exceeding your credit limit, applying for too many cards at once, and carrying a balance pose problems.
You are usually given a debit card when you open a checking account with a bank or credit union. A debit card allows you to spend money from your checking account without writing a check. The funds are removed from your checking account when you pay using a debit card. There is no need to pay any bills later on.