Moving around with physical cash is very risky and this makes it not only inconvenient but difficult to manage the way you spend. That is one of the reasons why debit card as introduced.
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A debit card is a plastic card which makes it possible to debit or use money directly from your bank account. Like a cheque book, a debit card is usually given along with other banking products (e.g. when you open a new savings or current account).
The advantage of a debit card is that it allows its holder to debit money at any authorised merchant as long as your account is funded. In some ways, a debit card is similar to credit card, but it only works when there are available funds in your account.
Debit cards are sometimes said to be half an ATM card and half a credit card. This is because some debit cards issued by banks allow you to enjoy the exclusive rights and discounts given to credit cardholders.
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When you make a transaction using a debit card, money is deducted immediately from your savings or current account because the card is linked directly to your bank account by electronic means. When the card is swiped at any merchant that accepts debit cards, it subtracts the money from your bank account and automatically deposits it straight into the merchant’s account. The merchant receives the money immediately.This type of transaction is different from when using a credit card, which is using borrowed money from a bank or financial institution.
Some debit cards will require your signature when transaction is in progress just like a credit card does, while other debit cards use a PIN number for verification. This is added for security reasons as only you will know your PIN number.
There are certain factors which you need to be aware of when you select a debit card, such as;
Limitations
Some debit cards are not allowed to be used for all kinds of transactions. For example, you may not make online transactions or purchases with debit cards from certain merchants. A debit card usually has a maximum limit you can bill for, though it is your choice to set the limit you want.
Linked Savings Account
It is a good idea to consider linking your debit card to an account that matches your spending habits. However, not all bank accounts can be linked to a debit card.
Fees And Bills
There might be fees you have to pay when you apply for a debit card. Most people do not usually consider these fees. The fees may include:
- Annual Fee:
The bank issuing the debit card may require that you pay an annual fee just as it is done with credit cards. Although, annual fees on debit cards are usually less than that of a credit card.
- ATM Withdrawals:
Some banks may offer up to a certain number of free ATM withdrawals, but start charging after that.
- Replacement fee:
If you lose your card and want a replacement, banks may charge you for this.
- Annual Fee:
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Debit cardholders do enjoy specific privileges and discounts such as;
- Cashback:
The cashback benefits on a debit card are usually less favourable than those offered by credit cards.
- Reward Points:
Just like credit cards, some debit cards reward you with points each time you swipe your card.
- Discounts:
As a debit card holder, you may also enjoy discounts and privileges offered by banks and participating merchants.
- Cashback:
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When you use a debit card, you will never be in debt with the bank since purchase amounts are deducted directly from your linked savings account. It is relatively easy to apply for a debit card in Malaysia, as all you need is to have a current or savings account that offers such facility.
One disadvantage of using a debit card is that you can only spend the money you have in your linked savings account. Any transaction in excess of your bank balance will either not go through, or result in the bank charging you an overdraft fee.
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- PIN:
This stands for “Personal Identification Number”. A PIN is like a password – it is a series of digits used during a transaction to validate that you are the cardholder.
- Debit Card Issuer:
This refers to a bank or any other financial institution that issues debit cards.
- PIN:
