Debit card

• What they are
• Interested parties
• Strengths and drawbacks
• Expenses
• Underlying rules
• Pitfalls

What they are

A debit card is a payment instrument that allows you to make purchases in places linked to the payment system indicated on your card, to withdraw cash from ATMs, usually both in Italy and abroad, and to make various payments. The most common one in Italy is generally called a bancomat (card). It's a plastic card that contains a microchip and a magnetic strip.

It's called a debit card because the amounts spent are immediately debited to the current account to which the card is linked. This is why you can only use a debit card if there is at least enough money in your current account to cover what you want to spend, unless you can use a line of credit or you have an overdraft facility. The bank that issues the card sets daily and monthly limits on how much you can withdraw and how much you can spend on purchases, which vary from customer to customer. When you use your debit card, you have to type in your PIN, both for cash withdrawals and card payments.

Some debit cards are contactless and you can use them without typing in your PIN, though usually for limited amounts.

Some debit cards can be used to make online payments too: in this case, as well as the PIN you also have to type in your CVV2 security code, which is the last three numbers on the back of your card. These two codes are useful for preventing unauthorized use of your card.

Interested parties

A debit card is a very practical payment instrument: not only can you use it to withdraw cash, but also to make various payments quickly, such as topping up your phone or paying a bill, and to get information about your account, like the list of your latest transactions and your balance.

If your card is linked to international circuits, you can use it abroad to withdraw local currency from ATMs or to make payments in shops, in both cases using the same PIN that you use in your home country.

Strengths and drawbacks

If you have a debit card you can carry little or no cash and have money available to make purchases at all times.

The main risks are those connected with unauthorized use of the card by others. This can occur when a card is cloned, lost or stolen. It's also important to keep an eye on your account statement. You must report any anomalies or fraud immediately, following the procedures indicated by your bank.

In any case, it's a good idea to check your account statement regularly because it helps you to keep your spending under control.

Expenses

The main costs of holding a debit card are:

• an annual fee (which is usually lower than a credit card fee) that is sometimes included in the fixed charges for the current account to which the card is linked;
• fees for cash withdrawals from ATMs at banks other than your bank or for cash withdrawals abroad;
• fees for foreign purchases or payments made in currencies other than the euro.

There are usually no charges for payments made with debit cards.

Underlying rules

Shopkeepers and the self-employed must have POS terminals and accept payments by card (although there are no fines if they don't). They should accept debit and credit cards, and the minimum amount for a card payment is €5.

Once you receive your card:

• store your personal identification number (PIN) separately from where you usually keep your debit card;
• when you make a purchase, check that the amount stated on the receipt that the vendor gives you is correct;
• you can ask to have incorrect or unauthorized charges corrected and any amounts not owed reimbursed within the time period specified in your contract;
• in the event of theft or unauthorized use of your card, you should immediately contact your card issuer, usually through a toll-free or dedicated telephone number, to 'freeze' the card and you should file a report with the police or Carabinieri.

Pitfalls

It has been shown that when we pay with cards, not only do we spend more but we also pay more for the same good or service than when we use cash. This is because we don't have to take cash out of our pockets. This is known as mental accounting, which refers to our tendency to sort cash into mental accounts based on its source.

Mental accounting can be useful when making complicated decisions, but we should not forget that decisions are often interconnected and that our behaviour changes based on the mental accounts we use and can lead us to make mistakes, like spending too freely when using a debit card.