Despite the fact that all major banks issue automatic teller machine (ATM) cards that are debit card enabled, only 11% of debit card transactions occur at point of sale.
Although this figure is growing it does illustrate that many people are not aware that their ATM cards are also debit cards that are linked directly to their cheque, savings and transmission accounts.
Basically, that cash card sitting in your wallet can pay for goods at a retailer in the same manner as a credit card and you can even use it to turn your retailer into a cash machine. But unlike a credit card, you can only spend what you have.
The most compelling reason for using a debit card is the cost saving when compared to an ATM withdrawal. Although the individual banks charge differing rates for debit card usage, it is usually around half the cost of drawing cash from your bank’s ATM and a third of what it costs to draw cash at another bank’s ATM.
Then there is the cash-back facility which many people are not aware of. Several major retail stores can be used as ATM machines when you make a purchase. For example, when one does one’s weekly shop at Checkers, the purchases can be paid for with your debit card and the teller may be asked to provide additional cash. These ‘withdrawals” are charged for but, depending on the bank, it could still be cheaper than using an ATM.
Debit cards also help to keep a record of expenses as all the transactions are recorded on your monthly statement. This helps to to track overspending. Then, of course, there is the safety factor. If one feels nervous about drawing cash from an ATM machine, paying with plastic is an advantage.
Debit cards can also be used for overseas travel. If powered by Mastercard (Maestro) or Visa (Visa Electron), debit cards can be used overseas to withdraw cash at ATMs and to make purchases at points of sale. Parents who have children on overseas working holidays can top up their debit cards locally to make sure they are not starving.
Although the costs are lower than an ATM, they are still significant. Depending on the bank, the point-of-sale charge ranges from R1,50 to R2,80 per transaction. If, for example, one plans on making purchases at several stores, it may work out cheaper to draw cash and pay a single fee — or at least ask for cash-back at the first point-of-sale transaction to fund the rest of your purchases. The cost factor also means this is not cost effective for smaller transactions. If, for example, one makes a purchase worth R20, at R2 your transaction fee costs 10% of the purchase price, but if one has to go to the ATM anyway, it could save money.
Using your card at point of sale
- The customer hands the debit card to the cashier, who swipes the card through the terminal.
- The customer enters their PIN (the same PIN used at an ATM) on the PIN pad.
- The account from which the customer wishes to pay (for example, savings) is selected by the customer.
- The amount of the transaction is entered by the cashier. (At selected merchants, customers can also draw cash as part of the transaction).
- The merchant’s terminal connects to the bank with which they have a relationship (transaction-acquiring bank).
- The acquiring bank links through a central switch to the issuing bank (where the customer’s account is held), which checks for available funds.
- The amount is immediately deducted from the customer’s account.
- The issuing bank confirms the transaction to the acquiring bank, which sends a confirmation message to the merchant’s terminal.
- A voucher is printed for the customer which reflects the transaction amount.