What is a Check Card?

Carrying cash around all the time or keeping a checkbook handy is a very inconvenient way to pay for services rendered. This was the norm until "plastic" came into being. This term refers to a system of using cards to make payments. A check card (also called the debit card) is a plastic card that acts like a check. One can make payments by swiping the card on a machine.

The check card is generally linked to the bank account of the card holder (usually it is the checking account) where funds are readily available. These funds can be withdrawn as cash from any ATM or when swiped, pay for the materials purchased. The card can also be used for shopping online.

The History of the Check Card

The first check card made its debut in 1978. These cards were issued by the First National Bank of Seattle to Executives maintaining large savings accounts with the bank. Like a check, the money that would cover the purchase made by the cardholder would not be withdrawn immediately from the account.

This was one of the reasons why check cards were only issued to those members who had a long history of good standing with the bank. As check cards grew in popularity, check usage diminished and eventually in 1998, check cards outnumbered check usage around the world.

How the Check Card Works

Check cards and credit cards look very similar, but that is where the similarity ends. Where credit cards allow you to pay for goods without having the actual money in the bank (i.e., with credit), check cards cannot be used to make payments without the actual funds. These cards are directly linked to the available balance in the account.

Without money in the account, the check cards are useless. The real time transfer of money from the bank account to the merchant's account assures guaranteed payment. This makes the check card a very attractive proposition both for the merchant and the buyer — the cardholder maintains control over the amount of spending and the merchant gets the money on a real time basis.

The Many Benefits of the Check Card

Making payments without carrying a checkbook or cash is the biggest benefit a check card offers. Other benefits include traveling without cash (no more traveler's checks) and withdrawing cash anytime from an ATM. The card also has many security benefits like the transactions being easier to track than cash, if the card is misplaced or stolen.

Check cards also erase the need of converting money into foreign currency when traveling internationally. Since the account can be accessed from any ATM, the check card allows usage of funds globally, while ensuring that cash withdrawals are in local currency.

Banks now offer virtual check cards to make purchases online. These cards can be filled up by the account holder with a prepaid sum of money which can then be used to make payments for good purchased online. The card generally has an expiry period of 24 to 48 hours making it a secure option for online transactions.

Check Cards Also Have Their Limitations

The biggest disadvantage of the check card is that without money in the bank account, all transactions are automatically voided. This means that no payments can be made until the checking account is deposited with funds. Emergency cash transactions, especially those involving large sums of money, cannot be made until the money is readily available in the checking account.

Overdrawing the account while spending is a very real possibility when it comes to check cards. The cardholder must remember the exact amount of balance available, which is not a difficult thing to do since most ATMs offer checking balance as a free service. Overdrawing the bank account may result in cancelled transactions or fees being charged by the bank.