Debit cards take the fight to our flexible friends

Some of us are cat-lovers, some of us are dog-lovers; relatively few of us find room in our hearts for both species, and some people live their lives without ever knowing the pleasures of owning either.

So it is with credit cards and debit cards. There are millions of people who regularly use credit cards and millions who use debit cards, but relatively few who use both regularly.

Both cards are made of plastic, both are convenient alternatives to cash and cheques. But they do seem to appeal to different people.

Credit cards had a 20-year head-start in this country, debit cards have only been around for a decade. Credit cards come in a great variety of breeds, ranging from the original Barclaycards and Access (now Mastercards), to brash new American breeds. Between them they have bred many affinity cards on behalf of charities and special interest groups. They are expensive as sources of credit, but shrewdly used they provide free credit for up to two months. Some incur an annual charge, some are free.

Debit cards are less diverse, less colourful, and there are only two big brands. Visa Delta serves Barclays, Lloyds TSB, Co-operative Bank, Abbey National and some building societies and foreign banks in the UK. Switch is the brand name established by NatWest, Midland and the Royal Bank of Scotland.

Debit cards were introduced as substitutes for cheque books. The card is swiped through a reader (or zapped through a machine that makes paper vouchers). The signed authorisation then acts as your receipt. The payment is automatically debited to your account, although it usually takes a day or two to complete the transaction.

Debit cards do not offer you credit. The cards are automatically accepted up to the floor limit of the store you are using even if there is not enough in your account. But you will be in trouble with your bank if you do not have an agreed overdraft limit in place to meet the payment you are trying to make. If the payment you are trying to make exceeds the store's floor limit and you do not have the money or an authorised overdraft limit to meet it, the transaction will be refused immediately.

There are no annual charges and no transaction charge, and they are quicker and tidier to use than a cheque book. And unlike a cheque, which usually requires the support of a guarantee card to make an instant purchase, a debit card alone will complete a purchase.

Unlike a cheque guarantee card, too, there is no limit on the value of the transaction provided you can meet the bill. The fact that there is no specific limit to the sum you can spend on a debit card is also an advantage relative to credit cards, all of which have credit ceilings.

Debit cards usually double as cheque guarantee cards and cash dispenser cards. In fact, they are free to get and free to use, and unlike credit cards they do not represent a constant temptation to users to overspend. And like cats as compared with dogs, they are quietly catching up in popularity. A year ago there were 28 million debit cards and 31 million credit cards. Now they are almost level pegging, although debit-card numbers are growing twice as fast.

Ten million cardholders claim they prefer using debit cards to any other form of payment over pounds 10, and in large supermarkets 55 per cent of non- cash transactions are now done by debit cards. Supermarket banking will push debit card usage up still faster.

The typical debit-card user is a cautious individual who likes to watch his or her personal budget and does not like to get into debt, or even to risk the temptation of buying things that cannot really be afforded. Specifically to meet the needs of ultra-cautious people, students and younger people with limited means, Visa also offers a mini-card, the Visa Electron, which requires all payments, however small, to be checked against the cash in the account to be debited, and is specifically designed for users who want the maximum convenience of a card without the temptation to overspend.

The Switch Solo card will do a similar job when it is introduced later this year.

Credit-card users by contrast are more extrovert, more willing to take risks, and may well be older, although it is not yet clear whether this is because the credit card predates the debit card and usage habits tend to get ingrained, or whether younger users are more cautious because they do not yet have as much money to flash around.