How Debit Cards function
Debit cards are the equivalent of carrying around your cash with you. Whereas with the debit card unlike lugging around loads of money in your wallet your cash is presented as a nifty plastic card that you can use to swipe for payments.
Unlike credit cards, payments using a debit card are immediately transferred from the cardholder’s designated bank account, instead of them paying the money back at a later date. Debit cards usually also allow for instant withdrawal of cash, acting as an ATM card for withdrawing cash.
Because debit cards can function in two ways: Like an ATM card for immediate withdrawals of cash or for purchasing like when buying an item. The money used to pay for the transaction is usually deducted from your account within a day or two depending on when the retailer presents the transaction for payment.
Debit cards are issued by the bank where the cardholder has an account, and non-banks cannot issue debit cards. The card’s funds are withdrawn directly from the bank account immediately via a PIN debit. These types of cards require electronic authorisation of every transaction and the debits are reflected in the user’s account immediately.
Due to the funds being secured against actual bank account funds, the risk of non-payment by the cardholder is lower than that for credit cards. Therefore the cost of servicing debit cards is usually much lower for banks, though that doesn’t necessarily translate to lower card acceptance costs for the merchant.