Debit cards are payment cards that are directly connected to bank accounts, usually current accounts. Unlike credit card cards and charge cards, which have their own card account there is no separate account between a debit card and a bank account. Debit cards are only supplied by banks, credit unions and other financial institutions that supply current or savings accounts.
It is sometimes better to think of a debit card more as a type of cheque book rather than as a type of credit card. This is because credit cards make their money primarily through charging interest on negative balances, and most people who do not pay their credit card at the end of the month will in fact be paying high interest rates. Debit cards do not make their money through interest rates, although using a debit card is marginally more likely to make a user go into overdraft. Debit cards make their money through annual fees and what are called merchant charges, which is the money that a shop or service provider pays to the card company so that the payment is processed. There may also be some money charged directly to the customer on each use.
The debit cards do use the credit card system so that in most shops with a credit card terminal debit cards are also accepted. There is also the convenience that a debit card has which means that it can be used over the internet, which means that it is perfect for those people who do not wish to use credit cards but are inconvenienced by the constant insistence on credit card wherever they go on the internet.
Most debit cards are also cash withdrawal cards, and are subject to cash withdrawal charges when used in ATMs. However when they are used to make a cash back withdrawal on top of a debit card payment for a good then they do not suffer any extra charges. They also do not pay the high rates of interest that credit cards pay when withdrawing cash.
Debit cards need to be kept secure. If they are taken then it can sometimes be quite hard to prove what purchases were made legitimately as there are not the big differences in spending that can be evident with credit cards as a debit card and a current account tend to be used more actively than credit cards and tend to have a wider range of transactions on the card.
