An Overview of the Debit Card

Debit cards are a very popular choice amongst Australians, providing all the convenience of regular credit card transactions using your own money instead of borrowing credit. Debit cards are more accessible than credit cards, and are great for people who are worried about debts, young people and students, and those on lower incomes. Check out the deals on our comparison table and see if there is a debit card that’s right for you.

The History Debit Cards in Australia

Debit cards quickly became a normal part of many Australians’ financial lives in the 1980s and the development of Electronic Funds Transfer at Point of Sale (EFTPOS). Switch cards were introduced to the Australian market in 1988, and rapidly became a popular and convenient way of making payments. By 1990 there were 19 million debit cards in use, and by 1995 they were more widely used than credit cards. In 1998, debit card transactions overtook cheque payments in popularity.

Over subsequent years debit card use continued to grow and by 2008 there were 28 million active debit cards in Australia, compared to 13 million credit cards. Consumers have adopted debit cards to a remarkable extent, making cheque payments almost obsolete. The development of chip and PIN technology for point of sale and ATM transactions has increased customer confidence in debit card security, and concerns about debt have helped make them a more popular choice than credit cards. Recent projections have estimated that by 2016 there will be more than 34 million debit cards in circulation in Australia.

Debit Cards versus Credit Cards

Debit cards and credit cards are very different products, each offering advantages and disadvantages. Debit cards are linked directly to your bank account, so you are only spending your own money, much like using your own cash. In contrast, credit cards offer you a short-term loan, with a monthly balance to be repaid.

Credit cards require a credit check and good credit history when applying whereas debit card applications require no credit check, so are more accessible and offer a safer way of spending money. Debit cards can be used most places that accept credit cards, but without the risk of running up debts.

Credit cards are very useful if you need to access funds to make purchases or get cash advances, and also offer other attractive features such as balance transfers and rewards programs. In return for these features, however, credit cards attract various fees and interest rates. On the other hand, debit cards have the advantage of featuring minimal or no fees and interest rates. Because debit cards are linked to your bank account, generally the only fees you should pay are those related to your account, such as overdraft charges. The pros and cons of credit and debit cards should be considered along with the way you want to use your card and manage your finances. Many people find it useful to use a credit and debit card in conjunction, using each for different types of expenditure.

Q: What are the benefits of debit cards? A: There are many benefits associated with using debit cards. Unlike credit cards, debit cards avoid the risk of running up debts since you are spending your own money directly from your bank account.

The average debit card features low or no monthly fees and no interest, so you only spend money on payments without accruing any extra charges. Some debit cards do feature a monthly fee, but this is usually much less than those applied to many credit cards. This is because you’re not paying for all the extra features, purchases and cash advances of credit cards.

Debit card payments are made using Visa and MasterCard systems, so they can be used in most places that accept credit cards. This includes retail outlets, restaurants, hotels, online and telephone payments – anywhere that accepts Visa and MasterCard payments.

Debit cards are a convenient and safe way to make everyday purchases, removing the need to carry large amounts of cash with you in public.

Debit cards are a good way to manage your money and avoid getting into debt. This is particularly useful for younger cardholders, students and people who find it difficult to manage their finances. They are also useful for people on low incomes or those with poor credit ratings, since they are much more easily accessible than credit cards.

Q: How do I choose the best debit card for me? A: This depends on how you want to use your card and what type of spender you are. There are several different aspects you should consider when choosing a debit card, such as whether you will use your card mainly for retail purchases, ATM withdrawals or online transactions. If you travel often you should make sure that your card can be used abroad. If it is a Visa or MasterCard, using your debit card won’t be a problem.

There may be extra benefits available on debit cards such as travel and purchase insurance and other perks. It is important that you study the small print of any additional features, terms and conditions, fees and charges before applying to make sure the debit card suits your financial lifestyle.

Q: What fees are applied to debit cards? A: Generally, debit cards have very minimal fees and interest rates, and many feature neither fees or interest. Some debit cards do attract a monthly fee, however, but this will usually be less than you would expect to pay on a credit card. Because debit cards are linked to a bank account, you pay normal banking fees and charges such as interest on overdrafts. You may be charged a penalty fee if transactions result in an unauthorised overdraft on your account.

Q: Can a debit card help me to get out of debt? A: If you are trying to sort out your finances, or are worried about getting into debt, a debit card can provide a good alternative to a credit card. Because you are only using your own money and not borrowing from the bank, you can make all sorts of card transactions without the worry of paying back the balance plus any interest accrued. You may still have a credit card debt to pay off, and you need to manage the money in the debit card’s account, but a debit card can help you get out of debt. You may also find it useful to use both a debit and credit card – using the debit card for everyday transactions and reserving the credit card for emergencies or specific types of payment.