Financial Dictionary - Debit card

The most common debit card operations include use as a means of payment. Unlike other cards, debit card payments are charged directly to the cardholder's current account. And unlike credit cards, you must have sufficient funds in the associated account for the payment to be accepted.

It is common for banks to set daily, weekly or monthly card limits for both physical and online stores, and ATM cash withdrawals, for security reasons.

What are the differences between debit and credit cards?

• Interest
  There are no interest payments of any kind with debit card transactions, as there is no option for instalment or deferred payment.
• Payment method
  Debit card purchases and payments are automatically charged to the cardholder's account. There must be sufficient funds in the associated account to make the payment.

This is not the case with credit cards, as they can be used for purchases even if there are no funds in the account, as the payment is charged to the credit that has been granted. Payment is generally deferred until the beginning of the following month.

• Financing
  Credit cards allow you to finance purchases and defer payment without having to have the funds in your account at the time of the purchase. The opposite occurs with debit cards; purchases are deducted directly from the account balance.

The main advantages of debit cards:

• The money you spend with your debit card comes straight out of your current account. If there is no money in the account, the card rejects the payment. Your balance is your limit. You cannot spend more than you have in your account and get into debt.
• This is a good alternative to carrying cash.
• You can withdraw cash from ATMs at any time of the day, any day of the week.
• Debit cards are accepted by most merchants, both physical and online.

Debit cards, like credit cards, comprise the following elements:

• Card chip
  This is located on the left of the card and is necessary for security and rapid transactions.
• Magnetic strip
  This occupies the entire width of the back of the card, although its use has now been replaced by the chip and, especially, contactless technology.
• The card issuer.
• PAN
  This is the card identification number. It comprises 16 digits and can be found in the middle of the card.
• Expiry date
  The month and year when the card expires. This is located under the card number and is needed when making purchases online.
• The cardholder's name
  The card is personal and non-transferable, and, therefore, always displays the cardholder's name.
• The international brand
  Mastercard and Visa are the most common.
• Holder's signature
  There is a space for the cardholder to sign the card when they activate it.
• CCV, CVV or security number
  This is a 3-digit number that is needed to make purchases online.