Debit Card

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A debit card can be used in much the same way as a credit card but instead of receiving credit after making your purchase, the funds are automatically (within a few days usually) withdrawn from your bank account.

Debit cards effectively aim to replace cash and cheques for many smaller transactions. Introduced on a large scale in the U.K. in the mid 1980s, they are a banker's dream because in replacing cash and cheques, they offer the hope of cutting banks' processing costs (cash and cheques remain costly for banks to process).

Most debit cards can be used to purchase goods and services in shops, via mail order and to withdraw cash at home and abroad from ATMs (cash dispensers). They may also be used as cheque guarantee cards! There are estimated to be some 26 million debit cards in circulation in the U.K. It can be argued that debit cards have some advantages over credit cards - for one consumers retain more control and don't spend money they haven't got. But the appeal of the debit card may decline because of another innovation - the smart card.

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Last Updated: June 2007 © Moneyextra.com

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