Debit Cards Basics

Understanding the simplicity and benefits of business debit cards
By Michelle Cramer Though debit cards look like a credit card, their link is directly to your business checking account. The funds for transactions made with your debit card come directly from your account. Basically, the debit card functions as a check, with faster processing and more security. The amount of funds in your checking account determines how much you can spend on debit card purchases.
 

Debit card providers, typically MasterCard or Visa, often issue debit cards through a bank in association with a checking or savings account. Before you agree to accept the debit card incentives of a new checking account, make sure you’re aware of the following debit cards basics:

1. When used correctly, a debit card will keep you out of debt, unlike a credit card.

2. Most merchants will accept debit card payment online but won’t accept a check.

3. Other options similar to debit cards in simplicity and security include reloadable prepaid debit cards or a prepaid credit card for business.

Avoid debt by using debit cards

Debit cards may function for many merchants like a credit card, but there are no added expenses tied into their use. Most banks provide a free debit card as an incentive for opening a checking account. Typically, the only fees associated may be transaction fees if you use the debit card at an ATM to withdraw checking account funds, and those fees are often less than $3. You can only spend as much money as there is in your business account, so there is no debt owed after a purchase and no interest charges or annual fees.
Try: ClearPoint Financial Services provides pros and cons to debit card use and information on how to protect the funds in your account. Apply online with a debit card provider such as MasterCard.

Use a debit card at merchants that don't accept checks

It has become more and more common for merchants to refuse the acceptance of personal or business checks as payment for a purchase, due to the fact that it is far too easy for an individual to write a check whether there are funds available or not. However, most merchants that accept credit cards will also accept your debit card because a debit card transaction will not go through if the funds aren't available in the checking account. Thus, merchants avoid losing money. Additionally, most Internet merchants accept debit card online payment just like a credit card but likely don't provide the option for you to enter a checking account number.
Try: Visit National Consumers League for thorough information on debit cards, including facts you should know before you use one. The article provided by Credit.com mentions typical vendors that won’t accept debit cards as well as other basic debit card information.

Try a prepaid credit card for business

Another option that works much like a debit card but also helps to build your business credit is a prepaid credit card for business. You deposit funds with the credit card company and use the prepaid credit card until those funds run out and you deposit more, just like a debit card. Additionally, you can use a prepaid credit card with some merchants that won't accept debit cards, due to an undetermined final bill amount, such as with hotel reservations or car rentals.
Try: WiseGeek explains prepaid credit cards in more detail. Visit the Federal Citizen Information Center for more information on debit cards. Click on Wallet Watcher for a printable sheet that will help you keep track of your credit and debit card supplier contact information, should your wallet get lost or stolen.

• Prepaid debit cards make a great alternative to gift cards from a specific merchant. They give the recipient the option to use the card at a location of their choosing. Be sure you choose free prepaid debit cards in which providers don't charge an activation or usage fee.