How debit cards can charge

Debit cards are often portrayed as the alternative to credit cards, and one of the primary reasons for this is that they have lower charges than credit cards.  While this is largely true, there are still fees that debit card holders will pay.

Credit Card charges are well known for being quite high if they are not watched.  Many of the charges are for things such as inactivity charges, over the limit fees and annual charges.  Not all cards charge these fees, and most of them can be avoided by knowing what these charges are in advance.

Debit cards although generally cheaper can have hidden charges.

There are two types of debit cards.  Charge cards, which are in fact older than credit cards, are a card that has a separate account from the bank current account, in the same way that credit cards do.  However unlike credit cards it is not possible to build up a debt with this account as the account has to be paid off every month.

Charge cards are expensive in that their merchant charges, the charges that shops and service providers pay to the card providers, are considerably more expensive than credit cards.  This can mean that many shops will not accept these cards or will charge a supplement.

Debit cards attached to a bank account tend to be somewhat cheaper than credit cards or charge cards.  However they do still have charges.

Annual and monthly charges are often charged for debit cards.  Annual charges are also becoming more common for credit cards.  These charges are usually advertised but they can build up over time.  It has become quite common to advertise a monthly fee rather than an annual fee.  Thus a $5 monthly fee can be advertised and compared against a $50 annual fee.  Although the $50 annual fee is cheaper this is not always how consumers see this.

Merchant charges are still charged against debit cards, although they still tend to be cheaper than credit card merchant charges.  However there are still stores that will either offer a cash discount or in some cases will only take cash.

Overdraft interest charges are also more likely with a debit card.  Whereas a credit card is likely to be turned down if a borrower were to go over their credit limit, this does not happen with debit cards.  These rarely get turned down and so open the borrower to overdraft interest and charges.