What Is A Debit Card And How Does It Work?

With similar payment capabilities as credit cards, yet none of the high interest charges, debit cards are an increasingly popular choice among debt-wary Singaporeans. 

According to a recent Straits Times report, debit cards have seen a surge in popularity among Singaporeans. The main driver of this trend is the heightened unwillingness to take on debt, given the uncertain economic conditions with COVID-19 still lurking in the background. 

You’re probably well aware that debit cards have been around for a long time, although they’ve long endured being regarded as the ‘poor cousins’ to the more prestigious credit cards. This was largely due to their lacklustre benefits and easy eligibility.

These days, debit cards are starting to look more and more interesting, although they still have a ways to go before they can hold a candle to credit cards.

But perhaps that’s an unfair comparison – after all, debit cards belong to their own class. Here are seven of the best debit cards in Singapore you should check out. 

What’s the difference between a debit card, credit card and an ATM card?

ATM cards: Basic banking and selected payments

So from the table above, we can see that ATM cards provide the least utility and perks, but are virtually cost-free to use. 

They are most suitable for basic banking functions, and may be used for selected types of electronic payments (such as NETS).

ATM cards are easy to apply for. In fact, they are regularly offered when you apply for an account at a new bank.

Credit cards: Convenient and versatile, but can be expensive 

Credit cards, on the other hand, are the most versatile card payment method, making them a highly convenient tool. 

They also provide a range of attractive perks and benefits, rewarding consumers for spending on them. 

On the flipside, credit cards come with many fees, which can add up to a pretty penny. 

They also should not be used to withdraw cash - such transactions are known as a cash advance, which is a type of loan that incurs service fees and high interest.  

Unless used responsibly, credit cards can cause you to rack up debt, which can be difficult to pay off on account of their high interest rates.

Credit cards also have rather strict eligibility criteria. You’ll need to be 21 or older, and fulfil the annual income requirement for the card you want. 

Debit card: Occupying the sweet spot 

Occupying the middle ground are debit cards. As a payment solution, they provide a level of utility that is on par with credit cards as they belong to the same payment networks, such as VISA or Mastercard. 

This means for the vast majority of the time, you can use a debit card wherever credit cards are accepted.

Furthermore, debit cards can double up as your ATM card for easy and cost-free cash withdrawals at local ATMs. 

However, debit cards must be linked to a valid bank account, which must contain sufficient funds for the purchase or withdrawal you’re trying to make. 

This makes debit cards unsuitable for big-ticket purchases (unless you happen to be holding that much cash in your bank account).

Debit cards also do not have as many perks and rewards as credit cards, due to the lack of fees which typically go towards funding such customer reward programmes.

They are also easy to apply for, as long as you’re 16 or older and have a valid bank account.  

How do debit cards help with debt management?

Debit cards can help users manage their debt in two ways.

Firstly, debit cards are limited by the amount of funds in the associated bank account. You can only spend up to that amount, and no more. 

Hence, this prevents debit card users from spending beyond their means, preventing the accrual of debt in turn. Using a debit card is a good way to learn how to budget your finances and control your spending. 

Secondly, switching to a debit card will allow you to continue accessing major payment networks like VISA and Mastercard. 

This enables you to carry on enjoying convenience and flexibility, without incurring additional debt or paying credit card fees. 

Best debit cards in Singapore

POSB PAssion Debit Card

The POSB Passion Debit Card comes bundled with a complimentary PA Membership, which is great if you’re a fan of the many interesting courses and activities offered at Community Clubs and PA outlets around Singapore. You can use your debit card to save money with members’ prices, and also get freebies and other perks.

Regular shoppers at Takashimaya can receive 1% cashback on all their purchases. Meanwhile, those who visit Cold Storage, Giant and other Dairy Farm Group stores can earn bonus points that can be redeemed for cash offsets, although you’ll need to spend at least S$400 within the month to qualify. 

You can also use the POSB Passion Debit Card to get 15% off Agoda bookings (valid till 31 Dec 2021).

Other key benefits include selected 1-for-1 deals on the 10th of every month, as well as the ability to use your debit card for Tap and SimplyGo on MRT and bus rides. 

DBS VISA Debit Card   

The DBS VISA Debit Card’s main benefit is the cashback you can receive on many services you are likely to make use of. 

With this card, you can receive up to 4% cashback on online food delivery, local transport and foreign currency spend (including online purchases), and 1% on local VISA contactless transactions.

New customers who sign up before 31 December 2021 will receive 10% cashback on food delivery and transport. 

While these cashback rates appear attractive, the maximum cashback you can claim is capped at just S$20 per month. Also, in order to qualify, you have to spend at least S$500 on your debit card, and keep your ATM withdrawals below S$400 for the month. 

Citibank Debit Mastercard

The Citibank Debit Mastercard doesn’t have anything too exciting in terms of perks, but it does offer a distinct advantage for those who make many cross-border transactions.

This card is Multi-Currency-capable, which allows you to sidestep conversion fees while locking in your preferred foreign exchange rates. This can help you save a tidy sum when paying for transactions denominated in foreign currency. 

Other useful features include both contactless and mobile payment capabilities, as well as acting as a bus and MRT card. Those who drive will appreciate the EZ-Pay functionality, which lets you pay for ERP gantry and car parking fees without having to use a stored-value card. 

There is also a range of lifestyle perks and privileges you can enjoy as a cardholder.    

OCBC FRANK Debit Card

The FRANK Debit Card helps you save with 1% cashback on selected convenience stores, fast food services, ride hailing and online fashion and shopping. Do note that you’ll need to charge  at least S$400 per month to your card in order to qualify for cashback.

Link your FRANK Debit Card with the Global Savings Account to enjoy waivers on foreign currency conversion fees on these eight currencies: AUD, CAD, CNH, EUR, GBP, NZD, USD and HKD. This helps you further save when shopping at online websites that transact in these currencies. 

You might also be attracted by the FRANK card’s unconventional designs - choose from 60 card faces featuring pop culture, animals, geography, hobbies, art and more to express your individuality. 

OCBC Plus! VISA Debit Card

This card is catered to those who frequently shop at stores under the FairPrice banner, including Unity pharmacy, FairPrice Supermarkets and Warehouse Club.

You can earn quite attractive cashback with this card (between 4% to 7%, and as high as 12% at Unity) but there are some major caveats. 

One, you’ll need to jump through some pretty illogical hoops to qualify for cashback. For example, you will need to spend at least S$200 at anywhere else except FairPrice stores, in order to earn 4% cashback (7% cashback requires at least S$500 monthly minimum spend).

Two, the cashback you receive comes in a mix of FairPrice Rebates and LinkPoints, meaning yet more hoops jump through to unlock the value of your cashback. 

Another thing to note about this card is that unlike other debit cards, there’s an annual fee of S$24, which is waived if you spend at least S$1,200 per year.

Given all these restrictions and complications, it’s hard to recommend this debit card to all but the most die-hard supporters of the FairPrice brand. 

UOB Debit Card

The UOB debit card lets you earn cashback for online shopping, groceries and transport, but its usefulness is hampered by a pretty narrow range of options. 

You see, you will only earn cashback when you shop at Shopee, Dairy Farm Group (Cold Storage, Guardian, Giant, etc.) and for Grab transactions (although this includes both ride hailing and food delivery). 

Also, while the cashback rate (as high as 3%) is not too shabby, your maximum cashback across all eligible transactions is capped at only S$20 per month. You’ll have to spend at least S$500 per month to qualify for cashback.

One other thing: this debit card comes with an S$18 annual fee, which is waived for the first three years, as well as when you make at least 12 VISA or Mastercard transactions per year. 

So if you’re thinking of signing up for this card, make sure it doesn’t end up as just an extra nice-looking ATM card. 

Aspire Corporate Debit Card

Unlike the preceding six cards, the Aspire Corporate Debit Card is purely for corporate use only. To apply, you need to be a director or appointed official of a registered business. 

So if you’re a budding entrepreneur in need of some financial and payment services, but don’t want to be tied down to a traditional business account with their large minimum deposits and multiple fees, the Aspire card should do nicely for you. 

Its main strengths are in providing much-needed payment solutions for local and cross-border transactions, while acting as a corporate account card for you and your team. 

The card’s virtual format means you can easily set separate budgets for different team members, and deep integration with Xero accounting software means less headache when it’s time to do your statement of accounts. 

Other useful features include 1% cashback on all digital services; no monthly fees, minimum balance or fall below fees; as well as low fx conversion rates.  

Read these next:
Debit Cards Versus Credit Cards in Singapore: Which Should You Use?
5 Things to Know When Graduating From Debit to Credit Cards
PAssion POSB Debit Card: The Decisive Review Guide (2021)
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How Does GrabPay Mastercard Compare To Other Credit And Debit Cards?