A direct deposit debit card is a card that can be used to withdraw cash from an automated teller machine (ATM) or to make purchases at point-of-sale (POS) terminals. The prepaid card is funded with a one-time or recurring direct deposit. Most direct deposit debit cards carry the logo of one of the major payment processing networks.
These cards enable someone who is unwilling or unable to establish bank accounts to receive his or her paychecks electronically. Someone who has a very low credit score is sometimes unable to open bank accounts, because many financial institutions impose minimum credit score requirements on new customers. Banks report people who overdraw and abandon accounts to the major credit bureaus and other reporting agencies. Some banks do not allow an individual who has repeatedly overdrawn his or her accounts elsewhere to establish new accounts. An individuals can utilize a direct deposit debit card if he or she has been denied access to regular bank accounts.
Many companies exclusively use direct deposit services to pay employees. Electronic funds transfers are less expensive to process than printing and mailing traditional checks. Some municipal governments require employees to set up direct deposits for payroll purposes.
Direct deposit debit cards enable people to make purchases without having to carry cash. Most debit cards come with a personal identification number (PIN) that the cardholder must use to access funds at ATM machines or to authorize payments at POS terminals. Cardholders can also make signature-based purchases and use the cards for online transactions. Debit cards are accepted in most locations that accept credit cards. Most debit cards can be used internationally as well as in the cardholder's country of origin.
Lost direct deposit debit cards are generally replaced within seven to 10 business days of the cardholder reporting the loss. Fraud protection is another advantage that the cards have over carrying cash. Customers can be reimbursed for many fraudulent transactions that occur on lost or stolen cards. In most instances, direct deposit debit card holders enjoy the same basic fraud protections as credit card customers.
The terms and conditions offered by direct deposit debit card issuers vary greatly. Annual fees are not uncommon on prepaid debit cards, and some issuers assess transaction fees when cardholders make purchases at POS terminals. ATM machines always dispense bills in certain denominations of local currency. Funds on cards that allow access only through ATM machines become inaccessible when the card's balance falls below the minimum withdrawal amount permitted at ATMs.