The Bank of the Philippine Islands (BPI) recently sent out promotional materials on debit cards. Although the product may still be unfamiliar to Filipinos, in the United States, the Seattle Times reported, as of 2009, following a major financial crisis, a study found that more people were using debit cards than credit cards so they could control their spending better. The report said financial analysts expected the rate of debit card use to continue to increase.

What exactly is a debit card?

BPI says, unlike a credit card which draws from a credit line to allow a cardholder to “buy now, pay later,” a debit card means “buy now, pay now.” The debit card is like the ATM (automated teller machine) card that banks issue as it “draws directly (and in real time) from one’s savings or current account.”

If the debit card functions like an ATM card, why should people get one? BPI says Filipinos who do not buy on credit usually use cash by going to an ATM first to withdraw money from their accounts. But a debit card will be accepted directly by the establishment, and the cost of the purchase will be deducted from the cardholder’s bank account.

Brian Bass, eHow Money contributor, says debit cards may be used in many countries around the world. This is convenient for people who travel abroad and want to limit the use of credit cards. They can use their debit cards on either the Visa or MasterCard network directly in establishments and do not have to withdraw cash from an ATM.

Bass adds, “Debit cards allow you to avoid carrying cash or a checkbook. Furthermore, by using a debit card, you will not need to carry travelers checks… Additionally, sellers sometimes will not accept checks, but they will accept debit cards. Finally, many merchants allow you to return merchandise and receive a credit back to your debit card.”

Convenient and safe

BPI says using debit card is more convenient and safer. Like the ATM card, a personal identification number will be required to complete a transaction. Debit cards are accepted in over 40,000 establishments in the Philippines (at any establishment affiliated with ExpressNet, MegaLink or BancNet). As the debit card is directly linked to a person’s bank account, it is expected that he/she will exercise more control in his/her spending.

BPI adds, “In general, there is no service charge for using debit facility; however, there are some cards that charge a fee for any debit done on the card (either ATM withdrawal or debit payment).

Oubria Tronshaw, another eHow contributor, says, “Credit cards, charge cards and debit cards allow users to pay for their purchases without fumbling with coins or wads of paper money. Buying goods and services is as easy as swiping a card, entering a personal identification number or penning a signature.”

She says, while using a credit card is similar to borrowing money from a financial institution, “debit cardholders do not have monthly obligations; the debit card is linked to their bank account, and the money is automatically deducted each time the card is used.”

Moreover, as money withdrawn through debit cards comes directly from the customer’s bank account, he/she does not have monthly limits. Tronshaw adds, “Debit cards do not charge interest rates because the money spent comes directly from the customer’s bank account, but they do charge overdraft fees. If a customer pays for something with her debit card but lacks sufficient funds in her account, the bank may charge her a penalty fee for covering the purchase.”

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