Pros And Cons Of Using A Debit Card

A debit card is one of the most popular banking products. It can be issued at almost any Bank that works with retail clients. Many banks also offer products with combined capabilities that simultaneously include credit and debit card characteristics. Debit cards are most widespread in Russia and other post-Soviet countries.

Main characteristics and features of a Debit card

This plastic card is used to withdraw cash and make non-cash payments when purchasing goods in regular and online stores. Therefore, such cards are also often called settlement cards. In this case, the holder spends his personal funds, which he previously deposited into his account.

Credit cards are more common in developed countries. They allow people to borrow funds for a short period (usually several weeks) free of charge (without having to pay interest) and direct them for investment or other purposes.

In Russia, debit cards are more popular since they allow you to avoid problems with credit arrears. The product assumes the use of personal funds only. Usually, the Bank does not provide a credit limit to the holder of such a card. The client pre-funds his account opened with the Bank and then uses the card to make payments.

A subspecies of such a financial instrument is an income card. It includes all the possibilities of a payment plastic card but simultaneously allows you to receive income as interest on the balance. As a rule, financial organizations give an interest rate of no more than 3-7% per annum.

Some cards may also have a credit card function. This is especially true for modern, so-called “virtual” banks. In this case, the card is a payment card, but the client can independently set a credit limit to use borrowed funds. This is usually done through Internet banking tools or at the client’s request in the office.

Benefits of Debit cards

payment bank cards have become very popular due to the following advantages:

Ease and speed of registration: A minimum of documents is required, and banks usually open such cards within a few minutes.

Ease of use: You can carry a small amount of cash with you constantly. You can pay for purchases through POS terminals. You can always withdraw some money if necessary.

Ability to use abroad: However, not all cards support this, which depends on the type of payment system used. This must be clarified in advance at the credit institution’s office. This allows you to take almost any amount on your trip without worrying about compliance with customs regulations.

It can be used in almost any country: International payment systems Visa and MasterCard operate in every developed country. However, there are also so-called local cards that work only in their own country, which needs to be clarified in advance.

Ease of account replenishment: This can be done not only in a bank branch but also in special payment terminals.

If the account has a function for calculating interest on the balance, you can earn additional income by keeping funds in it.

Security. The funds on the account equal the deposit and are covered by insurance. In case the Bank goes bankrupt, you can get back up to 1.4 million rubles.

Many banks offer various additional bonuses to their customers using similar products. These can include cashback (compensation of a certain percentage of the amount spent on purchases) or discounts from partners. The card can also be used for online payments, including purchases in foreign online stores. Please note that cashback and interest on the balance may be taxed as income.

Disadvantages of Debit cards

The main disadvantages of such banking products include:

Potential for additional commissions and service charges. Many banks charge a commission for cash withdrawals from ATMs and cash desks and account replenishment. Usually, the commission is 0.5-1%.

There is a daily limit on cash withdrawals. On average, it is 200,000-300,000 rubles.

Frequent debit card frauds. Fraudsters use various schemes and technical means to steal funds from holders’ accounts.

At its sole discretion, the Bank may change the interest to the balance. Very often, a high rate is set to attract customers, which is significantly reduced after a specific use time.

Sometimes, difficulties arise when withdrawing cash abroad.

But, all the shortcomings are due more to the peculiarities of payment cards than to the working conditions of the banks themselves. The Bank determines the conditions for each card product. For example, one financial institution may not have a cash withdrawal fee, while another may present it even when using its own ATMs.

Helpful hints

A payment card is a very convenient and relatively safe banking product. It can be recommended to people who want to avoid using credit funds. But, the choice of a bank and a specific product must be approached extremely carefully.

It is essential to study the advertising information and the contract itself. As a rule, you can read it in the office or on the Bank’s website. High interest rates on the balance, deposit offers, and bonuses are only some essential criteria for choosing a bank and a product. By replenishing a debit card, you transfer the funds to the Bank for safekeeping. Therefore, you need to select the most reliable financial institution.

Also Read : HDFC Credit Card: HDFC Bank Recovers Swiftly from RBI Ban to Launch Digital Card