A debit card is linked to your bank savings account.
You can use a debit card to purchase products or services in shops, petrol stations, on websites, over the phone, by mail order or to withdraw cash at ATM’s in Australia and overseas.
How Debit cards Work
Debit cards access money in your savings account so they offer most of the flexibility and convenience of a credit card but leave you in control because you can’t get into debt by using them.
When using the card you’ll have to prove your identity by signing a receipt at the point of sale (if you pressed CREDIT) or by entering your PIN (if you pressed SAVINGS/CHEQUE)
Remember that because the debit card uses your own money you can only buy items that cost less than your current bank balance.
So if you want to buy a new TV for $1000 and you only have $500 in your savings account than you can’t use your debit card to pay for the TV.
Who Offers Debit Cards
Australian debit cards are issued by Mastercard and VISA respectively and they have the same basic features – differing mostly by their fees and charges.
The following Australian banks issue VISA debit cards as well as many credit unions and building societies: ANZ, Bank SA, Bendigo Bank, Citibank, HSBC, nab, St. George Bank, Suncorp – Metway.
The only Australian banks which issue Mastercard debit cards are Bankwest and Westpac.
VISA entered the Australian debit card market first so they are the market leaders with more banks issuing their card and they claim that Australians have 4.3 million Visa Debit cards, which is quite impressive.
Mastercard offered their debit card product later on so they have fewer issuing banks but you should still investigate them because each bank that offers debit cards has slightly different terms and conditions.
How I use My Debit Card
I have a VISA debit card from Community First Credit Union which I use to pay business bills like office expenses, my business phone line and ADSL Account. It’s handy because some of my bills have to be paid by EFTPOS and some by Credit – either way it doesn’t matter because I can use the one card for both types of transactions and money spent comes from my business savings account.
Benefits of a Debit Card
- Too young?
- Have a bad credit record?
- Don’t earn enough income for a credit card company to risk issuing you with a credit card?
In that case a debit card is perfect for you because:
- It can be used to purchase goods/services online on websites that only allow credit card purchases
- It can be used to pay bills from companies like Internet service providers who may not accept BPAY or Direct deposit payments
- There’s no need for the bank/credit union you’re applying for a debit card to do a credit check on you because debit cards use your own money.
- You can use your debit card to buy goods or services anywhere around the world where Visa or Mastercard is accepted.
Drawbacks of a Debit Card
- The Reserve Bank of Australia (RBA) has ruled that from 1 January 2007, merchants (shop and business owners) are not required to accept a Mastercard or Visa debit card as a condition of also accepting a Mastercard or Visa credit card
This means that a shopkeeper is allowed to refuse payment by debit card if they wish to and ask for payment by cash or EFTPOS instead.
- Also from the same date the RBA allows shop and business owners to add a surcharge eg: 2% if you pay by debit card and select the “CREDIT” button after swiping your card at the cash register.
This reduces some of the incentive of using Debit cards because a main selling point is that by pressing CREDIT at point of sale you don’t get charged any fees.
If you don’t want to pay the surcharge you’ll have to press SAVINGS/CHEQUE instead and you’ll most likely have to pay your bank a transaction fee
- As Dwayne Charrington noted below in comments 4 & 5 if you select CREDIT when paying with a debit card then it can take a few days for your account balance to be updated – and this can cause you to think there’s more money in your account than there really is
- Official website of Debit MasterCard
- VISA debit page on VISA Asia website
- Reserve Bank of Australia – Regulatory Decisions relating to Debit Cards