There are a number of alternatives to debit cards, and if a person is thinking of getting a debit card then it is useful to decide what sort of service they want.
Credit cards are the most obvious alternatives to debit cards to most consumers. Debit cards and credit cards look very similar and they are accepted by the same places. They also charge similar amounts to shop keepers and service providers for processing payments made by the cards.
There is a big difference between debit cards and credit cards. Credit cards have their own account quite separate from debit card accounts. This account has interest charged on the credit card balance, and the interest is the main way in which most credit card providers make money. Debit cards are tied directly to a bank current account and make their deductions from this account. This means that a credit card payment is dictated by how high the credit limit is and a debit card account is dictated by whether the card holder has funds in their bank account.
As debit cards don’t have their own accounts, they often don’t have their own statements. This means that it is harder to track debit card payments.
Charge cards are in some ways very similar to debit cards. It is not possible to carry a balance on a charge card as it is on a credit card. However charge cards do have separate accounts from a bank account, although this does need to be paid off every month. Charge cards also tend to offer good services that either directly relate to using the card (such as guaranteeing that the card will be with the person in a certain amount of time) or relate to travelling, such as reserving hotel rooms later than would be possible without the charge card. This is made possible through the higher merchant charges, the money that the shop keeper pays to process the card payment.
Pre-paid cards are quite similar in effect to debit cards. These are credit cards that have to be paid in first to be used. Unlike debit cards they are not tied to a bank account and there needs to be a separate step to pay in funds to the card account.
Cheques are the most similar to debit cards, although they look entirely different. Cheques take money directly from the current account. However unlike debit cards they can take a few days to process. They are also less reliable in that it takes a while to know whether the cheque is actually going to be honoured, and by this time the goods may have left the store.
