Debit Cards

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We all know what a debit card is and how it works. Yet, few of us can say with authority that we know everything about this form of plastic money. Since it has a direct bearing on the credit balances in our bank account, it becomes imperative for us to know the ‘actual working’ of this instrument and what precautions to take to minimise – if not totally eliminate – any ‘frauds’.

Why are debit cards popular anyway? Well, for most of us, it is more convenient to carry a small plastic card instead of a bulky chequebook or a large amount of cash. Using a debit card is easier and faster than writing a cheque. Carrying cash means having to stuff it in your wallet (already full with credit cards and business cards!) and counting it every time before payment, not to speak of the quality of the currency notes you get in return. It’s also a good way to pay for purchases without having to pay interest, as you would if using a credit card. You can use your debit card even to get cash when you make purchases at a store (see box on ‘RBI stipulates conditions for “cash withdrawal” at point of sale’).

A debit card looks like a credit card but works like an electronic cheque, because the payment is deducted directly from a current/ savings account. If you use a debit card at a retail store, you or the cashier will run your card through a scanner that enables your financial institution to verify electronically that the funds are available and approve the transaction. Most debit cards are used to withdraw cash at automated teller machines (ATMs).