Pros And Cons Of Using A Debit Card
A debit card is one of the most popular banking products. Such a card can be issued at almost any bank that works with retail clients. Many banks also offer products with combined capabilities that include the characteristics of both credit and debit cards at the same time. It is debit cards that 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’s personal funds are spent, which he previously deposited into his account.
In developed countries, credit cards are more common. They provide an opportunity for a short period (usually several weeks) to use borrowed funds free of charge (without having to pay interest). At the same time, a person can direct his own funds for investment or use for 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 at the same time allows you to receive income in the form of 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 actually a payment card, but the client can independently set a credit limit for it in order to use borrowed funds. This is usually done through Internet banking tools or at the client’s personal 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, usually, banks open such cards within just a few minutes.
Ease of use. You do not need to constantly carry a large enough amount of cash with you. You can pay for purchases through POS terminals. You can always withdraw cash if necessary.
Ability to use abroad. But, not all cards support this, which depends on the type of payment system used. This moment must be clarified in advance at the office of the credit institution. This allows you to take almost any amount with you on your trip without worrying about compliance with customs regulations.
Can be used in almost any country. International payment systems Visa and MasterCard operate in every developed country. But, 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 there is a function of calculating interest on the balance, you can get additional income by keeping funds on the account.
Security. The funds on the account are equal to the deposit and are under insurance coverage. In case of bankruptcy of the bank, you can get back up to 1.4 million rubles.
Many banks offer all kinds of additional bonuses to their customers using similar products. This can be cashback (compensation of a certain percentage of the amount spent on purchases) or all kinds of 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, as well as for 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.
The Bank may, at its sole discretion, change the interest to the balance. Very often, a high rate is set to attract customers, which is significantly reduced after a certain time of use.
Sometimes difficulties arise when withdrawing cash abroad.
But, all the shortcomings are due not so much to the peculiarities of payment cards, as to the working conditions of the banks themselves. The conditions for each card product are determined by the bank. For example, one financial institution may not have a cash withdrawal fee, while another may present it even when using its own ATMs.
A payment card is a very convenient and relatively safe banking product. It can be recommended to people who do not want to use credit funds. But, the choice of a bank and a specific product must be approached extremely carefully.
It is extremely important to study not only the advertising information but also 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 not the most important 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 choose the most reliable financial institution.