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Reloadable debit cards

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Reloadable debit cards are debit cards that are not directly attached to a full service bank account, yet offer a useful way of controlling spending.

Most debit cards are attached to a bank account, which is usually a transaction account.  This means that if the card is used to buy goods or services the money is deducted from a bank account, in the same way that a cheque or a direct bank transfer would be.  Debit cards are used with many bank accounts other than just transaction accounts, which include savings accounts, investment accounts, lines of credit and flexible mortgages.

There are, however, debit cards which are connected with a bank account, which is not a full service bank account.  Such accounts essentially work around the facilities of the debit card.  Unlike transaction accounts, there is no facility to directly pay in wages or to obtain overdraft facilities, and there is also no interest charged on any of the funds. There is also no facility to write cheques, although most reloadable debit cards can be used on ATMs in order to withdraw cash.

Reloadable debit cards have a number of uses.  For example, a young adult or student can have their reloadable debit card topped up regularly by their parents.  This will mean that a person can be partially or totally supported by their parents but still have a certain amount of freedom in choosing how to spend their money, which can be a significant step towards financial independence.  At the same time, there is also the reassurance that there can be no temptation to go in to debt, as there might be with a normal credit card.

Another use for reloadable debit cards is when a person is making transactions in foreign currency.  This type of debit card is often a very good way to keep foreign currency costs down because the cards can often bought over the internet, pre-loaded in a foreign currency. It can also be the case that the card will not incur foreign currency charges.

Some people who have regular jobs also use reloadable debit cards as a way of budgeting money.  Instead of carrying a debit card that is linked to a transaction account they can carry the reloadable debit card and top it up by standing order every day or every week, out of their earnings.

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