• Card holder can withdraw cash from their bank account through an ATM
• Card holder can use this as a payment mode for purchase payments to merchants. The merchants have a cash- back function which are present at the sales stores and helps them enhance purchase experience
When a debit card is used for a transaction after purchase, money is withdrawn directly from the corresponding bank account. There might be a ceiling on the amount that can be withdrawn. Then the merchant gets the money in his/ her account.
It might take time to credit the amount into merchant’s account. To avoid the possibility of over drawing from the account, the card transactions can be linked to the card holders’ email or their mobile number so that they can keep a track of how their money is being used. At the end of every month, these purchases would be shown in the bank statement. The merchants are usually charged a percentage of every transaction that they make.
The debit cards might occasionally have a overdraw coverage due to which the card holders can use the card for small negative balances.
There are two types of systems:
a. A value from their respective bank account is stored in this card and is used to make various transactions
b. When the debit card is used for a payment or cash withdrawal, then their respective bank gets a message and the amount is transferred to the merchant’s bank account
Debit cards are issued by various payment processors such as Visa or MasterCard. The processor in India is RuPay which was designed and implemented by National Payments Corporation of India (NPCI). It enables electronic payment at different financial institutions.
Differences between debit and credit card:
• In a credit card account, money can be withdrawn even as debt. In a debit card system, cash is available only if there is money available in the bank account.
• A grace period of thirty days is given to pay the debt taken form a credit card. There is no such procedure available in a debit card
• For the possession of a credit card, a premium has to be paid after a fixed period of time. In case of possessing a debit card, banks give a discount (sometimes) for various purchases
• No need of cash payments
• Debit card can be used to make online purchases
• Better record of the purchases made unlike cash transactions
• Enhanced security with an option to block the debit card in case of theft
• Special discounts and cash back offers by financial institutions which is not possible with cash