There are many reasons why getting a debit card is a good idea. Whether you currently have a credit card or not, you may have noticed that as a country, we have accumulated a substantial amount of credit card debt. The government and the banks are taking steps to alleviate the issue, but as a consumer, you can also take steps to help your own situation.
Using a debit card correctly is a great way of staying out of debt. By only using your own money, it is much more difficult to get into debt in the first place. Instead of using a credit card, where it can be very easy to spend money that you don't have, you are limited to only using your own money. If you are unable to pay back what you owe on a credit card, you will usually have to pay interest, meaning that the amount you owe will keep growing until you pay it back.
A debit card is an excellent choice if you tend to overspend with a credit card, or if you can't get a credit card because of a bad credit history. It's also ideal if you are inexperienced with credit and you think you may get into trouble. However, many people choose debit cards just because they prefer to use their own money rather than credit.
Accepted anywhere credit cards are accepted, debit cards give you the convenience of using your own money, whether it is in-store, over the phone or online without having to worry about paying the money back later.
Frequently Asked Questions about Debit Cards
How does it work?
Depending on the financial provider you choose, the debit card you will be issued with will either be Visa or Mastercard. This means that your debit card will be accepted anywhere Visa or Mastercard are accepted. By linking the debit card to your bank account, you can use the convenience of plastic while only using your own money.
You can use the card to take money out at the ATM, to pay bills, or to pay for goods and services over the phone, in-store or online. No credit, no interest, only your own money.
Is it safe?
With the introduction of chip and PIN (Personal Identification Number) technology, debit cards are incredibly safe to use. Payments on debit cards are usually easy to track, especially with online banking. You can review everything that has gone out of your account online or on paper statements, so you can be sure there have been no unauthorised purchases.
If you find an unauthorised purchase, or if your debit card has been lost or stolen, contact your financial provider immediately. The card will then be cancelled, and many providers will take care of any unauthorised payments. Some debit cards also come with added fraud protection to give you extra peace of mind. Visa and Mastercard also offer guarantees against fraudulent use of their cards.
Where can I use a Debit Card?
You can essentially use your debit card anywhere that credit cards are accepted. The only difference is that you are using your own money, not a credit provider's. You can use the debit card for purchases online, in-store and over the phone, for large or very small amounts.
What are the benefits of a Debit Card?
Using your own money:
One of the best things about using a debit card is that you are using your own money. This means that you don't have to apply for credit, you are not using credit, and you don't have to pay anyone back.
No debt:
Using a debit card for purchases means it is much more difficult to get into debt. While it's still possible to be an irresponsible spender, you are not using credit that will have to be paid back. If you are unable to pay back what you owe on a credit card, you will be charged interest, meaning that your debt continues to grow. This can lead to a debt spiral that is difficult to get out of.
Everything is online:
With many debit cards, you will be able to apply online. When the account is open, you will usually have online access to your account, making it easy to keep track of everything that is going into and coming out of your account. You can also use your debit cards to make purchases and pay bills online as well.
Convenience of a credit card:
You can use your debit card in all the places that credit cards are accepted. This means you can use it online, over the phone and in-store, but with the knowledge that you are not spending money you don't have.
Great for people who are not good with credit:
If you tend to overspend or you are just not good with credit, then a debit card may be the perfect option. By only spending your own money, making purchases with a debit card is much more manageable.
Can be used for cash withdrawals:
If you make cash withdrawals with a credit card you will usually be charged a fee, and the money you take out will be charged at around 22% p.a. interest. Using a debit card, you can withdrawal your own money from an ATM, with little or no fees.
Can be used for smaller purchases:
Debit cards are being increasingly used for smaller payments under $10. The 'tap and go' feature is also becoming more popular, where you can tap your card against the terminal for payments under $100 for quick payment.
No cash needed:
Carrying a debit card means you don't have to carry lots of cash. No only can this be much safer, but it is also much more convenient.
Can be used overseas:
Many debit cards can be used overseas, in the same way as a credit card. Check with your financial provider for details.
Will I get charged any fees with a Debit Card?
Different debit cards will charge different fees. Usually you will be charged a monthly fee for the use of the account, however, some financial providers will waive this fee if you deposit a certain amount into the account each month. Typically, this can be easily achieved by having your salary deposited into the account.
You may be charged fees to use your debit card to withdraw money from other financial providers' ATMs. Also, be aware of overdraft fees. If you use your debit card for a $10 purchase and you only have $5 in your account, you may become overdrawn and charged by your financial provider. You should always try to keep track of payments from your account and be aware of how much money you have available.
Are all Debit Cards the same?
As with credit cards, you will find that there are many different options when it comes to debit cards. It's a good idea to think about how you plan to use the debit card and then compare options to find the best card to suit you. Compare fees, account access, fraud protection, and any rewards like entertainment benefits or complimentary insurances.
Can I get rewards from using a Debit Card?
Although you can get debit cards with reward programs, they tend to be less generous than rewards programs attached to credit cards. One of the reasons for this is because credit card companies make more money from their customers, so they are able to offer larger rewards. However, if rewards are important to you, you can find debit cards that provide entertainment offers on sporting events, cinema, and music gigs. Some debit cards also offer complimentary insurances, such as purchase protection and travel insurance.
Do I need a good credit history to apply?
Because you are not applying for credit with a debit card, you do not need a good credit history to apply. You will only be using your own money, which means you will not need to worry about interest accruing on debts, and paying back what you can't afford.
Should I keep my credit card after I get a Debit Card?
Many people choose to keep both credit cards and debit cards, so it is up to you if you want to use both. However, if you have trouble managing credit, then it might be a good idea to close your credit card accounts and only use a debit card. If you have existing credit card debt, you might want to transfer it onto a balance transfer credit card, and pay it off while using your debit card for everyday purchases.
Is there anything I should be wary of when using a Debit Card?
The main thing to be aware of when using a debit card is how much you are spending. It is important to keep track of payments coming into and going out of your account, so you know exactly how much money is available. Some providers will charge overdraft fees, so if you spend more than what you have in your account, you may be charged a fee.
Another thing to think about is that there are many different debit card options on the market. Spend some time comparing what's on offer, and choose the most suitable card for your needs.
Is a debit card suitable for you?
YES
I like to use my own money
YES
I don’t want to pay interest charges
YES
I want to be able to shop everywhere you can with a credit card
