Varieties of Debit Cards

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Varieties of Debit Cards

Owing to their ease of use and their ability to tie into an existing source of money, debit cards have assumed many different uses. As they grow in popularity, look for them to pop up in places where people want to access their own funds.

HSA and FSA debit cards

Debit cards are available with many health savings accounts and flexible spending accounts. These accounts are funded with tax-deferred money. With them, you can pay for products and services that are covered by your HSA or FSA, such as medications. The cards withdraw funds from your account at the point of purchase. There are rules, limits, and guidelines for using these cards, many of which are set by the institution offering your card. One note: withdrawals are meant to be used only for eligible medical expenses. If you use your card for an expense that is not eligible, you will have to pay income tax on it when you fill out your tax forms for that year.

401(k) debit cards

Debit cards now exist for 401(k) plans, allowing you easy access to your funds. The funds must be paid back, though, as they are actually loans. There are rules and regulations on the use of these cards.

Prepaid debit cards

Prepaid debit cards are also called gift cards and reloadable cards. They allow you to add money to them and build up a balance. Typically, you buy them with a certain amount of money already on, and depending on the card, you can add additional funds. Prepaid cards tap into the large pool of people who have little or no access to bank or credit union accounts and those who are wary of using credit cards for certain purchases.

Payroll cards are a type of prepaid debit card offered as an alternative to a paycheck or direct deposit. Your wages get loaded onto the card for you to use.

Despite these advantages, prepaid debit cards come with fees. You may be charged a monthly fee just for having the card. Sometimes you get a grace period before the charging starts. There may be fees for periods of inactivity. You will likely be charged a fee each time you use the card. Finally, there are often activation fees. You might also be docked each time you inquire about your card’s balance. Planning to call customer service? Some cards have fees just for that.

Rewards cards

Rewards cards are incentive programs offered by financial institutions and businesses to persuade you to spend money with them. They pay you when you use the cards at select locations. With some, you amass points. With some airlines, you amass miles. Still others deposit cash into a bank account that they are tied to. This cash may be a percentage of the purchase price or a set amount for certain purchase thresholds. They thus work in a manner similar to how cash-back programs work for credit cards. Various rules exist for these programs. For example, a bank might require you to keep a certain minimum amount deposited in order to get the rewards.