Debit cards, unfortunately, have a few disadvantages that you should be aware of. For one thing, if you don’t faithfully record your transactions you can easily cause your bank balance to plunge out of control. For the most part, this disadvantage is countered by the ability to access your account balance 24/7 on the internet. You should also request your balance any time you withdraw funds from an ATM. While no interest is charged, often there are heavy use fees associated with a debit card. If, for example, you use a foreign ATM (one not owned by your bank) the bank that owns the ATM may charge a fee of up to $3.00. Often your own bank charges a fee for ATM withdrawals from a foreign ATM as well that match the fee charged by the ATM owner. You could pay up to $6.00 to withdraw a minimum of, say, $20.00. That is a high price to pay for having access to your own funds. You may avoid all fees by only using an ATM owned by your own bank.
Finally, the bank debit card provides no help with credit repair. If you have had credit problems in the past and you are working to rebuild your credit through the responsible use of credit, only the responsible use of a credit card will help. Because the bank issuing the debit card is not issuing credit they do not report transactions to the credit bureaus. There are other solutions that act much like a debit card, for example, a secured credit card, that will help with credit repair. The point is, if you have had credit problems, please do not be misled by the claims of getting a debit card to rebuild your credit.
Now, the lines are blurring between the two forms of payment-debit or credit-for both merchants and consumers. When someone pulls out a plastic card with the MasterCard or Visa logo on it to pay for food, gas, or a store purchase, he or she may conduct the transaction using a signature, or in the case of a debit card, by entering a PIN number on a check out keypad. The signature payment method runs on a credit card network. The PIN payment method runs on a debit network. Merchants pay a fee in either case (to MasterCard or Visa) as part of their doing business.
The real difference between credit cards and debit cards has more to do with the funds being transferred. When you buy something with a credit card, you are not spending your own money but rather borrowing money against a credit line that the bank issuing the card has extended to you. The only limit on your spending is the limit imposed by the credit card the perfect gift So, when you make a payment towards your outstanding balance you are paying back the credit card company for earlier purchases This fee is slightly lower in the case of PIN transactions, which is why some retailers like WalMart and CVS Pharmacy encourage debit card users to pay by PIN.
Here’s what happens behind the scenes when you make debit card purchase. You are actually accessing your own money that is sitting in a bank account. As the transaction happens, money is transferred out of your account, travels across the network, and is transferred into the merchant’s bank account. PIN purchases happen in real time, so the amount in your account is verified and transferred immediately. Signature transactions, which travel across the credit card network, do not have to happen in real time but can happen hours later in a “batch” process with other transactions. The transfer of funds from the cardholder to the merchant can also be delayed, some times as long as two days, depending on when the batch process is executed.