A plastic card that may be used for purchasing goods and services or for obtaining cash advances for which payment is made from existing funds in a bank account. Debit cards are handier than writing checks, and can be used either for PIN-based online transactions or offline transactions requiring a signature. From a consumer's standpoint, a debit card is generally a less desirable method of payment than a credit card, which offers longer float and better rewards.
Case Study Debit cards, often called “check cards," have rapidly replaced checks and cash as a means of paying for consumer purchases. The popularity is due in large part to banks heavily promoting a very profitable product. Use of a debit card allows the issuing bank to earn a fee from the accepting merchant without being required to process a check or wait on payment. Debit cardholders often don't realize they face more risk than holders of credit cards. Unauthorized use can produce substantial losses when a debit card is lost or stolen, because liability is limited to $50 only if the cardholder notifies the issuing bank within two days of learning of fraudulent use. The liability can be $500 or more after two days and up to the amount of the fraudulent use in some instances. In comparison, consumer liability for credit card fraud is limited to $50. If fraudulent use involves use of the credit card number but not a loss of the card itself, there is no liability for unauthorized use. In addition, credit card users are permitted to dispute a charge and withhold payment pending an investigation of the disputed transaction by the issuer. Purchases with a debit card come directly from the cardholder's bank account, so payment will already have taken place if the cardholder wishes to question the transaction. Thus, the cardholder must battle with the issuing bank for the return of the money. In the meantime, fraudulent use of the card that drains an account may result in bounced checks and accompanying fees levied by the issuing bank. Consumers should also keep in mind that rental car companies generally will not accept a debit card payment as a security deposit for a rental vehicle.
plastic card that has a magnetic strip on one side that can be swiped. A debit
card is used to pay for goods and services. The bank or financial institution
issuing the debit card pays the merchant and then deducts the amount of the
transaction from the debit card holder’s bank account immediately. In contrast,
a credit card balance doesn’t have to be paid for many months after a purchase.
A plastic card that may be used for purchasing goods and services or for obtaining cash advances for which payment is made from existing funds in a bank account. Because a debit card provides about the same float as a checking account (one to three days), it is a less desirable method of payment than a credit card. These cards are often part of the comprehensive all-in-one accounts offered by many brokers.