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A debit card is a plastic card or a credit card without debt. The word debit means “ to subtract ” and, as the name suggests, when you use your debit card you are subtracting money from your account. Unlike credit cards, debit cards allow you to spend only the amount that is in your bank account. Debit cards look like credit cards but operate like personal checks as the money is directly pulled out from the card holder’s bank account.

Most of the banks offer the following types of debit cards:

* Cards designed solely for ATM withdrawal (PIN required)
* Cards that allow ATM withdrawals as well as purchases (signature required)

When you shop using a debit card, you can use a personal identification number (PIN) or your signature to process the transaction. Once the transaction is done the money is taken out from your account immediately.

When you use a credit card the money is not withdrawn from your account after every transaction.

When you make a transaction with a credit card, your card is swiped through the point-of-sale processing terminal and the transaction amount is entered to check your credit limit. If you have sufficient credit to cover the purchase then the transaction is approved. As soon as the approval comes through, you are given a printed receipt to sign.

In case of credit cards you have to use them with the understanding that you will pay back the amount, and if you do not pay in full each month then you have to take care of the interest too.

Though debit card usage wards off the debt trap but it can cause some debt management problems. They are more susceptible to fraudulent use than credit cards. So it’s the card holder’s responsibility to remain cautious when their debit card is taken out of sight for a transaction.

I will be very soon writing some tips on the responsible usage of a debit card….so hang on!!!!