What is a debit card?
A debit card is a card that does not provide cardholders with access to lines of credit. The cards link to checking accounts and have 16-digit card numbers and CVV codes. Many cards contain EMV chips to make them more secure when you make in-person purchases from merchants. Now that you understand “What is a debit card”, How do debit cards work? When you use the card, the purchase price debits from your checking account balance. Transactions that made with the cards operate like electronic checks with the purchase prices subtracted automatically.
Why do people use debit cards? How popular are they?
People use debit cards for many reasons. They might be preferred over credit cards because they do not add to the debt. The money for transactions made with the cards subtracts from the cardholders’ existing balances.
People may also choose to use debit cards because of their convenience and added safety versus carrying large sums of cash. The cards allow people to have access to their money without having to take it with them. People can also use the cards to make purchases online or over the phone with any merchant that accepts cards.
What’s a credit card?
While a debit card links to a checking account, a credit card connects to a revolving line of credit. There are credit card advantages and disadvantages. To get a credit card, you have to submit a credit application, which can impact your credit score. Purchases made with credit cards are charged to the credit line and add to your level of debt.
Balances that carry over month to month on cards that are credit may incur high rates of interest that may range from an average low of 13.12 percent to more than 20 percent. Some cards also charge high annual fees, making it vital for you to shop around. Different types of credit cards include the following:
- Travel rewards cards
- General purpose consumer cards
- Airline rewards cards
- Hotel rewards cards
- Business cards
- Corporate cards
- Student cards
- Cashback cards
- Secured cards
What is the difference between a credit card and a debit card?
Is a debit card like a credit card? If you want to know what is the difference between a credit card and a debit card, the primary difference is where the money for purchases resides. With a card that is credit, the payment for transactions subtracts from the available credit on the credit line. Purchases made are primarily paid for with loans from the card issuer, and you must repay them. Being charged interest is a result of not paying for your monthly balance in full.
With a card that is a debit, the transactions deduct from your bank account balance. Since the money is your own, the purchases do not incur interest or add to your debt. Both types of cards allow you to complete transactions at any merchant that accepts your card’s brand. The leading providers of cards in the U.S. include Visa®, Mastercard, Discover, and American Express.
Debit card statistics
In the U.S., there are more than 5.6 billion debit cards in circulation. The leading providers of debit cards are private label companies. Debit cards are the preferred online payment method worldwide. In the U.S., an estimated 197 million people own debit cards, and they account for an estimated annual purchase volume of 3.011 billion.
Many people prefer to use cards that are linked to their checking accounts to make purchases as a safer alternative to carrying around cash. The cards also allow people to use them wherever credit cards are accepted.
What are the different types of debit cards?
There are many different types of debit cards, including the following:
- Check cards
- ATM cards
- Gift cards
- Prepaid cards
- EMV debit cards
- Business debit cards
Check cards work like electronic checks. When you swipe them, the purchases subtracts from your bank account. ATM cards are cards that only allow you to use them at ATMs with your PIN. These cards are primarily phased out and replaced with check cards and EMV cards that perform both functions.
EMV cards are cards that contain EMV chips. They can be used to make more secure purchases at merchant locations that have EMV-enabled card terminals. These cards are becoming more widespread. The cards also contain magnetic strips, which allow places that do not have the EMV-enabled terminals or online to use them.
Prepaid cards and gift cards do not link to a checking account. Instead, you purchase them in the amount that you want to make available on the cards. Purchases subtract from the balances on the cards. Finally, business cards are designed for businesses and may have additional features for expense controls that consumer cards do not offer.
Do debit cards charge fees?
Most card issuers and banks do not charge fees to consumers for using debit cards. However, the merchants get charged higher interchange fees for the transactions than those that pay for with credit. Some banks may incentivize the use of credit vs. debit.
Some banks may charge transaction fees when you use debit instead of credit. Other costs that one might associate with a debit card include ATM fees when you use the cards at out-of-network ATMs.
Can you overdraft a debit account?
Whether your debit card-linked checking account allows you to overdraft will depend on your card and your bank. Many banks offer overdraft protection as an option, which will enable you to overdraft your account up to a certain limit.
While this feature may allow you to complete transactions when you do not have enough money in your account, it comes at a high cost. Overdrawing your bank account will result in per-transaction fees of around $35. Some debit cards do not allow you to overdraw your checking account, and you can also opt not to have overdraft protection.
Additional details on credit cards vs. debit cards
There are several other differences and similarities between credit cards and debit cards. The similarities include the following:
- Both contain 16-digit card numbers and CVV codes
- Different brands such as Visa®, Mastercard, Discover, or American Express offer both types
- Both may be used to make purchases in-person or remotely
Some additional differences between the cards including the following:
- Credit cards require credit approval, but debit cards do not
- Cards that are credit may charge high rates of interest and high annual fees
- Cards that are debit do not charge interest
- Purchases made with cards that are credit add to your credit line and your debt
- Cards that are debit do not add to debt
How secure are debit cards compared to credit cards?
Less secure than credit cards, debit cards are less safe due to the protection the card provider offers. What is the security code on a debit card? The security code is a three-digit number that you can find on the back of the card at the right-hand side of the signature line. The code gives additional security because it indicates that the person that his the card is the one who is making the purchase.
Debit cards don’t offer the same reimbursement benefits when someone steals a card, or a fraudulent charge goes through. Since you know what is the security code on a debit card, you might wonder why the card is less secure than a credit card.
The best credit cards offer generous reimbursements when a fraudulent charge goes through. By contrast, you have to act fast when someone steals your debit card, or you see fraudulent charges. Banks may make you responsible for the first $50 of your losses after an investigation.
What do you need to open a debit card account?
What you might need to open a debit account will depend on the type of card that you want. To get a consumer card, you can open a checking account that offers a linked card. Opening a business account requires you to show documents that show that you are a business.
These cards do not require you to submit to credit checks. Some cards also may be purchased online or at retailers, such as prepaid cards. What is a prepaid debit card? It is a type of card that you purchase in the amount that you want to serve as the card balance and does not link to a bank account.
What is the difference between a debit and an ATM card?
An ATM card is a card that has mostly been phased out. These are cards with PINs that can be used to withdraw money at ATMs. They cannot be used to make purchases directly, however.
Most banks no longer offer ATM cards. Instead, the debit cards serve both functions and can be used at ATMs with PINs as well as to make purchases.
What is a business debit card?
A debit card for business works similarly to a consumer card, but it may have some additional features. Business cards link to business bank accounts. The transactions that made with the cards subtract from the bank account balance.
Business cards may offer features to meet the needs of companies. Some business cards come with features that allow business owners to set individual spending limits and to restrict the transactions by the type or to specific merchants. These features can help businesses to control their business expenses and to reduce the risk of fraud.
Consumer debit vs. business debit cards
Consumer debit cards are cards that consumers get from their banks. They can use them to make purchases in person or online, and the transactions subtract from their checking accounts.
Business debit cards may offer additional benefits. Some of these cards allow business owners to create virtual cards that can be used to make single purchases giving you an extra layer of security. The numbers expire after one purchase so a thief can’t access the accounts even if they manage to steal your number.
Businesses may also be able to generate ghost cards that they can assign to specific departments or individual high-volume suppliers for better expense tracking. Finally, business cards may let business owners set spending limits per transaction or by the day. Some cards might let business owners restrict the usage of the card based on location or purchase type.
How debit cards can help businesses budget better and control expenses
Business debit cards can help companies to budget their money better and to manage costs. Some cards offer great expense tracking and control features together with automated importation of transaction data into the business’s accounting or bookkeeping software.
The controls may allow businesses to restrict how employees use the cards and how much money they can spend each day or week. Companies can also turn the cards off or on by clicking or tapping a button on the screen of smartphones, tablets, or PCs from the dashboards.
Where do you get a business debit card?
Now that you understand what a debit card for business is, you might wonder where you can get them. You can research different offers online. There are numerous banks and private card issuers that offer business debit cards with features designed for businesses.
Fraud: What should you do if someone steals your debit card?
If someone took your card, it is crucial for you to act quickly. Call the card issuer and report that someone has stolen your card. The card issuer will turn the card off and send you a new card. If any unauthorized charges were made the bank will investigate them before they decide to reimburse you.
If you have a business card, you may have the ability to turn the card off from the card’s dashboard online. Turning the card on or off can be done instantly without having to go through the bank’s process.
How the cards work for businesses
Bento for Business Visa® debit card are designed to help companies to control their spending and to cut their expenses. Business owners can restrict the cards by setting individual limits, deciding how much money to make available on each card, placing purchase category limits, and limiting the cards so that they can only be used to make purchases from preferred merchants.
Bento has earned hundreds of reviews from its thousands of business customers. It has received favorable media coverage in national publications such as Forbes, the Wall Street Journal, and others. You can read reviews at reputable third-party sites such as Capterra, TrustPilot, and the Better Business Bureau.
Learn more about the benefits
With Bento, you can enjoy one platform to manage your business spending. A debit card is highly beneficial to your company. The cards are business Visa® cards and are designed to work for all types of businesses. They give businesses full control of the spending and can be turned on or off right from your phone 24 hours per day.
You can try the Bento for Business Visa® debit card free for 60 days. The company also offers a free demo if you would like to see how the cards might work for your company. You can sign up now to get started or call 866-220-8455 to speak to a customer service professional.