What are Advantages of Debit Card ? Benefits

Advantages of Debit Card

The following points discuss important benefits or advantages of debit card.

ADVANTAGES OF DEBIT CARD

1. Prepaid card

   Debit card acts as a type of prepaid card. It is so, since it already has a sufficient amount of cash balance in its holder’s bank account. It permits to carry on the value of the transaction (i.e. purchases) to the extent of available balance in its holder’s bank account.

2. Nominal fee

   Bank issuing a debit card charges an annual fee for the issuance and maintenance of card. This fee charged is very nominal in nature. Generally, bank charges the fee on a per annum or yearly basis. Such a fee gets automatically debited (deducted) from the debit-cardholder’s bank account.

3. Alternative to cash

   Debit card acts as an alternative mode of payment for executing various cash-related financial transactions. It can be used for the purchases of goods and receipt of services. In its presence, there is no need to carry a large amount of cash. Thus, it helps to avoid carrying huge amount of cash while traveling and minimize risk of loss due to theft, damage, etc.

4. Immediate transfer of funds

   Debit card ensures immediate transfer of funds in the merchant’s or dealer’s bank account. Such a transfer of funds takes place almost instantly at the moment of purchases of goods and receipts of services. With its use, there is no need to visit bank’s office premise and do a manual transfer of cash in the merchant’s or dealer’s bank account.

   Thus, it saves precious time and gives ease, safety, and comfort to its holder in his or her’s finance-related activities.

5. Instant withdrawal of cash

   The debit card facilitates instant withdrawal of cash from any nearest ATM. This helps its holder to avoid a personal visit to bank’s office premise and wait in a long time-consuming queue.

   In short, it also acts as an ATM card to meet its holder’s cash-related needs, anytime and anywhere.

6. Easy to manage

   Debit card is very easy to carry, handle and manage while traveling to outstations or overseas. Being small, thin, flat and having a negligible weight it easily fits in any pocket. It can be handled very freely even with just two fingers. Managing it is also not a big problem.

   A cardholder must just take enough care to see to it that:

   • Debit card is always covered with a thick plastic cover to avoid scratching of its sensitive surface.
     
   • It doesn’t come in contact with contaminated water and heat.
     
   • It doesn’t get folded accidentally; this helps to prevent its breakage.
     
   • It is placed safely in a convenient location which one remembers. This helps to avoid it getting misplaced and lost due to negligence.
     

7. Earns bonus points

   Now-a-days, the competition among debit card providers (banks) is challenging. Today, most banks offer bonus points to encourage their cardholders (customers) to make purchases using their debit cards. Banks are able to offer such points to their cardholders as it’s merchants and not them who actually run the reward program.

   After every successful sale, a merchant gives the bank a small cut-off or percentage as a commission. This commission is further shared or divided by the bank with its holder (as a reward) who did the original purchase. Thus, in return, it finally also helps the cardholder earn bonus points on selected financial transactions executed by him or her via a debit card.

   In this cycle, all, viz., bank, merchant, and cardholder are directly benefited. Bank offers an incentive like this to improve the sale of the products in the ordinary course of business and contribute in the economic growth.

8. Gifts on redeeming points

   As we have seen above, debit card helps to accumulate bonus points through a reward program. These points can be redeemed by the cardholder (within card’s expiration date) at any merchant website and/or outlet that bank has already authorised. While redeeming accurred points, cardholder gets an idea of its worthiness in terms of amount, and so he/she proceeds to claim gifts nearly equal to that amount.

9. Cash back

   In a cash back, cardholder gets a percentage of the total amount spent on purchases made using his card. In other words, when a holder use his debit card to buy something then a percentage of entire money he spent usually in a month is credited-back to his account once every following month.

   Consider for an example, a debit-cardholder spends 100 dollars three times a month on shopping and the cash-back offer on shopping is 10 percent. In such a case, cardholder will get back $30, which is 10% of $300 ($100 × 3) returned to his account in the coming month.

   However, to avail this offer some minimal amount must be spent on some minimum number of transactions at least once a month in a specific currency by eligible cardholders only.

   For an instance, a cash back debit card provider may say in his terms as,

   “To get 10% cash back you must do a minimum of three transactions in any calendar month. A minimum of $100 must be spent per transaction. All legit spending must be in US $.”

10. Free insurance coverage

    Debit-cardholders also gets free insurance coverage. The bankers provide such insurance facilities to attract new customers and to maintain their current customer strength.

    They provide various types of insurances for free to their cardholders:

    • Insurance on loss of debit card,
      
    • Purchase insurance,
      
    • Personal insurance,
      
    • Accidental insurance,
      
    • Travel insurance, and so on.
      

    However, these types of insurances are given freely to cardholders depending on which type of debit card they have possessed.

    The cost of insurance premium is borne by the bankers who provide debit cards to their customers.

11. Miscellaneous advantages

    Miscellaneous advantages of debit card are as follows:

    1. Debit card acts as an alternative to a traditional cheque payment.
       
    2. It helps to budget one’s expenses and do a responsible spending of own money within account limits.
       
    3. Its holder uses his own money and not any borrowed (loaned) money. Unlike a credit card, here, no interest is charged. Hence, its transactions are interest free.
       
    4. It is accepted internationally, by e-commerce websites, and almost everywhere by merchants who display the logo of payment processing companies like VISA, Master Card, American Express, etc. This ensures making successful payments anywhere in the world with ease.
       
    5. It offers optimum levels of security. This greatly minimizes the chances of fraud, misuse and theft of money.
       
    6. Overall, it enhances the banking experience of a cardholder.