Differences between Debit and Credit Card
Pay now, or pay later with interest? That's the difference between a Debit Card (also referred to as a Debit Credit Card, Keycard, Handycard, Flexicard, Access Card or Cashcard, depending on the issuing bank) and a credit card.
Put simply, a Debit Card lets you spend your own money without carrying cash. That's the main difference between a Debit Card and a Credit Card!
Debit card processing is often handled identically to credit card processing, requiring a signature to complete the transaction. The alternate EFTPOS system, requiring a PIN (Personal Identiication Number) to be entered into a machine to verify your identity, is regaining popularity since changes to Australian law allowed merchants to charge fees for card transactions. EFTPOS is free of merchant fees, but a bank fee may be imposed for each withdrawal, especially if the terminal used for withdrawal does not belong to the bank that issued the card.
Those who struggle to balance their budget, forget or struggle to find time to pay bills, or stress over owing money, should cut up their credit cards and apply now for a Debit Card from their preferred bank!
When you use a Credit Card, the difference is you are borrowing money from your bank, just as you would if your cheque account allowed an overdraft and you wrote cheques for more than the amount in your account. Within a month of your purchase, your bank will send you a statement and ask that you pay at least a portion of the total amount owing. If you pay the full balance immediately, you might not be charged interest. Otherwise, interest charges will be added to the total owing—usually at high rates! If you don't pay the required amount by the due date, heavy penalty fees apply! Unless you are careful of your spending and diligent about bill paying, using a credit card can be expensive. For many, using a credit card starts a 'debt spiral' that may be difficult to control and painful to end!
A great solution for those who like the convenience of a card, but don't want to incur debt, the Debit Credit Card lets you use a swipe card (or numbers and PINs for phone or internet purchases) to spend your own money! Immediately the seller processes your order, funds from your bank account are transferred to the seller. You still receive monthly statements, but, like a bank statement, they detail the dates and amounts of withdrawals and show the remaining balance. There is no bill to pay. There is no risk of penalty charges for late payment. No interest costs apply. What's more, for those without an established credit history, a Debit Card may be easier to get.
You can also use most debit cards to withdraw cash from your bank account. Conveniently, almost any ATM anywhere in the world will dispense cash in local currency on insertion of your card and entry of your private PIN. Travellers enjoy the convenience of access to foreign currencies on demand, whenever and wherever needed.
Of course, you can use most debit card to pay for purchases both at home and abroad, so you don't need to carry foreign money to buy goods and services when travelling. (If you are planning a trip abroad, forget traveller's cheques and apply for a Debit Card or Visa Passport instead!)
You can also use some Debit Cards to buy goods safely over the Internet, or to pay bills by telephone. It's quick, convenient, safe, and inexpensive (although most users pay some fees for the convenience.)
Especially for 'card not present' transactions—such as Internet purchases, where you can't physically insert your card into a machine—Debit Cards are safer than Credit Cards. Any fraudulent transaction can access no more than the balance in your account. Some security conscious 'net shoppers use a special 'prepaid' Debit Card account, keeping a nil balance until they want to make a purchase, then electronically transferring just enough to cover the purchase. If you are nervous about shopping on the Internet, you may want to apply for a Debit Card to use this way. Some banks even offer special debit card accounts (there may be no physical card involved) for Internet use.
Prepaid debit cards are also great for budgeting, and for managing spending allowances of dependants or employees.
Australian banks offer a wide choice of Debit Card accounts. Card features vary, so it is smart to compare cards to ensure you enjoy the best features available for your needs. Visit our Debit Card Comparison table for advice on choosing the best card for your needs, then apply for your choice of Debit Card and start enjoying the convenience of debt-free shopping without carrying cash.
