Which payment option takes money out of your bank immediately?

Which payment option takes money out of your bank immediately?

a) Cash

b) Debit card

c) Credit card

d) Check

Answer: b) Debit card

Debit cards are proven to be linked to a certain account hence leading to immediate withdrawal of the amount of money loaded in that account. An immediate transaction is one of the aspects that makes debit cards different from other payment instruments mentioned in the options.

Unlike in credit card services where an account balance can be approved even if the user is still within their grace period, with debit card services, any time you make a transaction with the card to purchase goods and services or cash you either GET an approval or a rejection. For instance, each time you buy, groceries worth 50 dollars, for example, you pay through your debit card and automatically, fifty dollars will be deducted from your checking account. What this immediate deduction simply implies is that the only form of expenditure that is available to the individual is cash, and this can be useful in matters concerning the formation of debts.

Cash on the other hand (option a) is money ‘out of your pocket’; therefore, it does not involve a bank transaction. Credit cards (option c) are just the provision of an instrument that allows an individual to buy a good or service, and at a later date, make repayments to the card provider; thus, there is no immediate change in the balance of the accounts. Transfers (option d) generally require having a few days to clear, to detract money from the account depending on the banking system and the cash amount.

However, it must be said here that while debit card transactions are almost real-time, some of the merchants may hold the amount or get the transactions recorded as “pending”. Nevertheless, such funds are still restricted and cannot be spent on other accounts; therefore, they are considered to be tied-up funds. As with the case with expenses, people who like to track their expenditures so that they can set a budget or a limit are advised to go for debit cards because debit cards cannot extend a credit line such as credit cards can.