What is Debit Cards and How does it work ?

What is Debit Card ?

Debit cards are upgraded ATM cards branded with ICICI, UTI, SBI, VISA, PNB, HDFC,  Master Cards or other familiar credit card company logo. They look exactly like credit cards, except they directly tap our Chequeing amount every time we make a purchase or a withdrawal. They are easier, more convenient, less cumbersome, less burdensome, and offer greater access to our money than do cheque, ATM or credit cards. Debit cards can be used with or without a personal identification number (PIN) almost everywhere – retail stores, gasoline petrol stations, restaurants, pay phones.

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When used without a PIN (called an off-line transaction), the procedure is simple. The Merchant’s terminal reads the card and identifies it as a debit card that creates a debit against our bank account. Because the transaction is off-line, instead of debiting our account immediately, there is a 2-to-3-day wait before final processing.

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However, when a debit card is used for off-line transactions, as in the case of retail purchases, a thief can find a way to drain our account simply by getting hold of a receipt. The thief does not actually need our card number is sufficient to commit the fraud. The liability of card holder in case of debit card is more than that of credit cards. worse, regardless of the liability, the thief has our money and we have to fight to get it back from the bank.

In the case of credit card fraud, we simply talk with the bank about getting disputed charges taken off the bill.

When a debit card is used with a PIN, as in using an ATM machine, it is called an Online Transaction. we simply insert the card in the machine, enter the PIN number and proceed as we do when using a ATM card.

Today banks are pushing hard to replace the ATM card with a debit card without asking customers if they want one. The reasons are obvious. There are more merchants with credit cards readers than PIN- based readers. Bank also make more money through off-line debit cards in percentage fees or discounts from the merchant. Both banks and merchants make more money and have lower risks than when we write a cheque because there are no cheque- clearing costs, less float time, and no cheques to bounce.

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