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. Youre probably well aware that debit cards have been around for a long time, although theyve 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 thats 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. ATM card Debit card Credit card Primary function  Withdraw cash from ATMs  Make selected electronic payments  Withdraw cash from ATMs Make payments for various transactions  Make payments for a wide variety of transactions Provide unsecured credit May be used for cash withdrawals, but costly Spending limit  Based on bank account balance Spending or withdrawals are immediately debited  Based on bank account balance Spending or withdrawals are immediately debited  Based on limit granted to cardholder Transactions charged are first made against credit limit, to be repaid to the bank later Transaction limits may exceed bank balance, but not credit limit on card Typical fees  Card replacement fees  Card replacement fees  Annual fee Interest on balance carried over Cash advance fee Supplementary card fee Conversion fee for certain perks Perks  None  Limited  Earn cashback, air miles and reward points Enjoy cardmember benefits (discounts, vouchers, complimentary services such as travel insurance, etc.) Overseas usage  Yes, but fees may apply  Yes, but fees may apply  Yes, subject to conversion fees and other charges Eligibility  Bank customer aged 16 and above No minimum income required  Bank customer aged 16 and above No minimum income required  Aged 21 and above Minimum annual income required  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. ALSO READ: 3 best credit cards for petrol discounts at Esso, Shell, SPC & Caltex (2021)  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. Youll 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 youre 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 youre 16 or older and have a valid bank account. 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  Name of card Key benefits Eligibility and fees PAssion POSB Debit Card  Complimentary PAssion membership worth S$12 (entitles you to members rates and perks at Community Clubs and PA outlet) Spend at least $400 and receive 6x TapForMore points at participating Dairy Farm Group stores (150 TapForMore points = $1 off) 1 per cent cashback at Takashimaya Department Store and Takashimaya Square Up to 15 per cent off Agoda bookings till Dec 31, 2021 1-for-1 deals at selected merchants on 10th of every month Tap and SimplyGo function for bus and MRT ride payments  At least 16 years old Have a POSB Savings Account, DBS Savings Plus Account, DBS Autosave Account or DBS Current Account Annual fee: $0 PA membership fee: $12 for five years (waived perpetually) DBS VISA Debit Card  4 per cent cashback on online food delivery  4per cent cashback on local transport (ride-hailing, taxis, buses and MRT) 4 per cent on all foreign currency spends including online purchases 1 per cent cashback on local VISA contactless spend  New customers get 10 per cent cashback on food delivery and transport  Minimum spend of $500 and ATM withdrawals of under S$400 per month required to qualify for cashback Cashback capped at $20 per month Tap and SimplyGo function for bus and MRT ride payments  At least 16 years old Have a POSB Savings Account, DBS Savings Plus Account, DBS Autosave Account or DBS Current Account Annual fee: $0 Citibank Debit Mastercard  No additional conversion fee for foreign currency transactions and overseas ATM withdrawals Contactless and mobile payments enabled Tap and Go on buses and MRT rides EZ-Pay-capable, can be used for ERP gantry payments and other fees while on the road Lifestyle benefits and privileges  At least 16 years old Available accounts for linking: Citi MaxiGain Savings Account; Citibank Interest Plus Savings Account; Citibank Maxisave Account Annual fee: S$0 OCBC FRANK Debit Card  1 per cent cashback on fast food, and selected online fashion, convenience stores and ride-hailing spends Minimum spend of $400 a month required to earn cashback Zero foreign currency conversion fees for selected currencies (when linked to Global Savings Account) Supports contactless payments, including for bus and MRT rides 60 card designs to choose from  At least 16 years old Available accounts for linking: FRANK Account; Global Savings Account Annual fee: $0 Card replacement fee: $30 per card from third card onwards OCBC Plus! VISA Debit Card  Spend $200 monthly outside of FairPrice stores and earn 4 per cent cashback at FairPrice stores, 3 per cent cashback at FairPrice Online Spend $500 monthly outside of FairPrice stores and earn 7 per cent cashback at FairPrice stores, 3 per cent cashback at FairPrice Online Cashback given in mix of FairPrice Rebate and LinkPoints Enabled for VISA PayWave transactions  At least 16 years old Available accounts for linking: OCBC Plus! Savings Account Annual fee: $24 (first year waived.)  Annual fee waived with minimum spend of $1,200 per year UOB Debit Card  3 per cent cashback on Shopee Singapore 3 per cent cashback on Dairy Farm Group stores 1 per cent cashback on Grab transactions  Minimum spend of $500 per month to qualify for cashback Cashback capped at $20 per month Free overseas ATM withdrawals in Malaysia, Indonesia and Thailand Enabled for contactless and mobile payments, including bus and MRT rides  At least 16 years old Available accounts for linking: UOB Savings/Current Account Annual fee: $18 (first three years waived) Annual fee waived with at least 12 VISA/Mastercard transactions per year Aspire Corporate Debit Card  1 per cent cashback on digital marketing and SaaS spends No monthly fees, no minimum balance, no fall below-fees Low foreign transaction fees, from 0.7 per cent on VISA rate  Only director or appointed official of a business to apply  POSB PAssion Debit Card  PHOTO: POSB  The POSB Passion Debit Card comes bundled with a complimentary PA Membership, which is great if youre 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 1per cent 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 youll need to spend at least S$400 within the month to qualify. You can also use the POSB Passion Debit Card to get 15 per cent off Agoda bookings (valid till Dec 31, 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  PHOTO: DBS  The DBS VISA Debit Cards 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 per cent cashback on online food delivery, local transport and foreign currency spend (including online purchases), and 1 per cent on local VISA contactless transactions. New customers who sign up before Dec 31, 2021 will receive 10 per cent cashback on food delivery and transport. While these cashback rates appear attractive, the maximum cashback you can claim is capped at just $20 per month. Also, in order to qualify, you have to spend at least $500 on your debit card, and keep your ATM withdrawals below $400 for the month. Citibank Debit Mastercard  PHOTO: Citibank  The Citibank Debit Mastercard doesnt 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  PHOTO: OCBC  The FRANK Debit Card helps you save with 1 per cent cashback on selected convenience stores, fast food services, ride hailing and online fashion and shopping. Do note that youll need to charge at least $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 cards unconventional designs  choose from 60 card faces featuring pop culture, animals, geography, hobbies, art and more to express your individuality. ALSO READ: Best business credit cards in Singapore (2021)  OCBC Plus! VISA Debit Card  PHOTO: OCBC  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 per cent to 7 per cent, and as high as 12per cent at Unity) but there are some major caveats. One, youll need to jump through some pretty illogical hoops to qualify for cashback. For example, you will need to spend at least $200 at anywhere else except FairPrice stores, in order to earn 4 per cent cashback (7 per cent cashback requires at least $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, theres an annual fee of $24, which is waived if you spend at least $1,200 per year. Given all these restrictions and complications, its hard to recommend this debit card to all but the most die-hard supporters of the FairPrice brand. UOB Debit Card  PHOTO: UOB  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 per cent) is not too shabby, your maximum cashback across all eligible transactions is capped at only $20 per month. Youll have to spend at least $500 per month to qualify for cashback. One other thing: this debit card comes with an $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 youre thinking of signing up for this card, make sure it doesnt end up as just an extra nice-looking ATM card. Aspire Corporate Debit Card  PHOTO: Aspire  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 youre a budding entrepreneur in need of some financial and payment services, but dont 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 cards virtual format means you can easily set separate budgets for different team members, and deep integration with Xero accounting software means less headache when its time to do your statement of accounts. Other useful features include 1 per cent cashback on all digital services; no monthly fees, minimum balance or fall below fees; as well as low fx conversion rates. This article was first published in SingSaver.com.sg.