Debit cards were first promoted as a replacement for cheques and so it’s quite natural to compare the two or to use them interchangeably. However, debit cards are most suitable for certain circumstances and cheques for others.
There are some similarities, the most obvious of which is that they both access an associated bank account, usually a transaction account. However, there are some differences. For a start, a transaction account normally charges roughly 50 cents per cheque for processing, although the actual amount can vary. Some transaction accounts allow a certain amount of cheques be written without charge each month in return for a monthly administration fee or the promise to deposit a certain sum each month into the account.
Cheques also carry a certain amount of float, e.g., it takes a few days for the cheque to be deposited into and paid from the account. This makes it possible for a person to write a cheque before pay day but not have it subtracted until the salary has been deposited into the account, although that practice carries the obvious risk of mistiming and overdrawing. Cheques can also be backdated.
When paying for items by post, a cheque is still the most accepted and preferred method for many merchants. Debit cards, on the other hand, are most often used for payment over the internet, second only to credit cards.
It’s very hard to misuse a cheque outside of outright forgery. The cheque is written to a certain person and has a certain value. It is hard to transfer. While debit card details are easy to steal, like credit cards they carry a zero liability guarantee in Australia. However, the guarantee kicks in after a fraudulent transaction has already occurred, making it a messy matter of cleanup rather than prevention.
Cheques are accepted by more businesses and private individuals than debit cards, as they require only a bank account and not merchant processing facilities through the EFTPOS system or a credit card provider, as is the case with debit cards.
However, cheques are rarely accepted abroad, as the systems through which banks honour payment are domestic rather than international. Debit cards are accepted across the world through the processing and currency conversion systems of Visa and MasterCard.
With all this in mind, regular payments are often best done through debit cards, to prevent the monthly effort and expense of writing and presenting a cheque. Expensive or special purchases, on the other hand, are best made with a debit card, as they often are given an extended warranty or money-back guarantee, in addition to that provided by the manufacturer or merchant.
