Understanding Debit Cards (Explained in Layman Terms)

Primary banking accounts are often able to be accessed through a multitude of ancillary products. One of the most common products used by bank customers are debit cards. A debit card is a means by which a customer can access their funds through an ATM or make purchases or payments in person or online. Commonly referred to as a “check card,” the debit card  is tied to a customer’s checking account in a way that makes its use nearly identical to the process of writing a paper check.

Debit cards, while capable of allowing access to a customer’s account through an ATM, are different from the traditional ATM cards in one fundamental and important way: debit cards are able to be used to make purchases and are afforded many of the same allowances and protections of the credit card organization to which they are linked. Visa and MasterCard are the most common distinctions for debit cards. The cards are emblazoned with either company’s logo and accepted everywhere the credit card variants of the card are allowed. Unlike a credit card that charges the amount of a purchase for future billing, the check card debits the amount of a purchase from the balance of the attached checking account.

Instantaneous debit is a luxury that comes with certain specific responsibilities. A customer who charges an amount with their debit card that exceeds the amount of their checking account balance will incur overdraft fees or have the debit declined or both! Customers without overdraft protection will need to be particularly mindful of the ways their purchases made vie debit card are reflected in the various ways a customer monitors their account.

One common hiccup customers who have debit cards face is the occurrence when a debit card purchase is not reflected accurately on an account summary. The most common example is the following: A customer with a checking account balance of $100 makes a purchase with their debit card in the amount of $80. The account balance drops to $20 to reflect the debit card purchase. Sometime later, usually 2 to 5 days after the purchase, the debit could cease in being represented in the account ledger. A customer may view their account and see an available balance of $100. Armed with this incorrect information, the customer can make another purchase for $30. The total of the two purchases has exceeded the actual balance in the checking account by $10. When the account is reconciled to reflect all purchases, the account will be overdrawn and subject to fees and other penalties established by the bank. 

The reasons for the accounting confusion varies and is based oftentimes on the time the vendor (where the purchase was made) has to claim the funds debited by way of the debit card. The surest way to avoid this common predicament is to maintain detailed records of your debit card use and refrain from blindly trusting the account ledger at a given point in time.