Debit card is like plastic money without need to carry cash. Every time swipe, you use funds which already available. There are few ways how bank make money on every time debit card used.

Banks earn less on debit cards compared to credit cards revenue. In table below comparison of debit vs credit cards parameters.

Swipe fees reduced drastically with usage increase (economy-of-scale) . It’s objective Volume driven revenue. Debit card usage positioned as best way to manage finance and follow budget. In most cards overdraft protection leads to limited spendings of already earned money.

Most debit cards rewards are not granted by bank.But slowly reintroduced to engage customers to pay, even for small purchases by card. Customer more often do small purchases (coffee, lunch, grocery, transportation cost etc) than big purchases. To benefit from economy-of- scale small purchases advised by banks by cards.

Visa Inc, MasterCard Inc, American Express etc receive small %age from each transactions. Issuing bank also receive %age from each transaction. In most countries merchant pays interchange fees. Interchange rate ensures optimization and effectiveness of payment system.

It’s customer choice which card to use and how to benefit from loyalty programs. Most important to avoid unnecessary purchases and keep track on income to expenses ratio.

By my-financial-wealth.com

Trader, blogger, traveler

Leave a Reply