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When it comes to personal finance, two unsung heroes take the stage: direct debit and debit cards. While often overshadowed by newer technologies, these two remain the pillars of our everyday financial transactions.

In this article, we’ll dissect the features and distinctions of both, and also help you navigate the right fit for all your transactions.

Let’s jump right in 

## Direct debit
This payment method allows an account holder to give permission to a third-party to withdraw money from their bank account. It’s convenient and ensures payments are on time. This payment method lets an account holder authorize a third-party to take money from their bank account. It is convenient and ensures timely payments. The account holder can schedule automatic withdrawals for specific amounts on certain days, like a Netflix or Dstv subscription. 

## Debit card
A debit card allows customers to buy things or get cash from ATMs by taking money directly from their bank accounts. It also allows customers to make purchases or withdraw cash from ATMs using money from their bank accounts. Debit cards do not involve borrowing money like credit cards. Instead, they use the account holder’s own funds for transactions. When you use a debit card for a purchase, the same amount is taken from your linked bank account. You can also use debit cards in stores or online, and they often display logos from card networks such as Verve, Visa, or Mastercard.

Featured read: Do you want your loan approved? Try these 5 hacks!***

## Similarities
Direct debit and debit cards share common features that revolve around electronic payment, the linkage to a bank account, and the process of payment authorization.

## Electronic payment
Both direct debit and debit cards enable electronic payments, facilitating transactions without the need for physical currency.

## Linked to a bank account
A fundamental similarity is their association with a bank account. Debit cards are directly linked to your bank account, providing instant access to funds whenever you make a purchase or withdrawal. Similarly, direct debit involves a connection to your bank account, allowing authorized parties to withdraw funds for recurring payments.

## Payment Authorization
In both cases, payment authorization is necessary. With a debit card, you authorize transactions by providing your PIN or a signature. In direct debit, initial authorization is granted to specific entities to deduct funds from your account on agreed-upon dates.

## Differences
Some of the key differences between both methods are classified under purpose, payment initiation, security and dispute.

## Purpose
- Direct debit: is primarily intended for automated recurring payments, like utility bills and subscriptions, ensuring timely settlements without constant manual involvement.
- Debit card: is designed for versatile financial transactions including purchases, ATM withdrawals, and online payments, allowing instant use of available funds. Think “ATM cards”.

## Payment initiation and transfer processing
- Direct debit: Payments are initiated by the payee, who obtains your authorization beforehand. Funds are requested from your account and debited on agreed-upon dates.
- Debit card: You trigger payments by presenting the card at point-of-sale terminals or ATMs. Funds are instantly transferred from your account to the recipient during the transaction.

## Payment security
- Direct debit: Requires initial authorization, lowering the risk of unauthorized transactions. Although, automated processing can potentially be a security concern if not properly monitored.
- Debit card: Your participation is needed for every transaction, either through a PIN or a signature. Ergo, cardholders have more control over transaction validation.

## Transaction dispute
- Direct debit: Disputes may arise from unauthorized transactions or errors in payment amounts, involving coordination between your bank and the payee to resolve.
- Debit card: Transaction disputes are relatively straightforward. If you spot an unauthorized or incorrect transaction, notifying your bank triggers an investigation that can lead to a reversal.

## Pros and cons of direct debit
Before you choose this method of payment, let’s learn about some of its benefits and drawbacks:

## Pros
**Convenience**: Direct debit offers convenience by automating regular bill payments, eliminating the need for you to remember due dates.

**Timely payments**: It ensures timely payments, reducing the risk of late fees and penalties.

**Financial discipline**: Direct debit encourages financial discipline by ensuring essential bills are paid consistently.

**Reduced administrative burden**: With automated payments, you spend less time managing bills and can focus on other aspects of your finances.

## Cons
**Lack of control**: Automated payments might lead to overlooking bill amounts or changes in service fees, potentially resulting in unexpected withdrawals.

**Insufficient funds**: If a direct debit is processed and your account doesn’t have enough funds, you incur overdraft fees or face declined payments.

**Cancellation challenges**: Cancelling or modifying direct debit arrangements might involve contacting both the payee and your bank.

**Potential errors**: Mistakes in payment amounts or incorrect deductions could occur, requiring time and effort to rectify.

Featured read: How small loans help overcome financial emergencies in present-day Nigeria***

## Pros and cons of debit card
Consider the advantages and disadvantages of using debit cards for financial transactions before using them:

## Pros
**Immediate access to funds**: Debit cards offer quick and convenient access to the money available in your bank account for purchases or withdrawals.

**No debt accumulation**: Transactions with debit cards use your own money, eliminating the risk of accumulating debt as with credit cards.

**Budget management**: Debit cards help you manage your budget by preventing overspending, as they use your existing funds.

**Widely accepted**: A vast majority of merchants and ATMs accept debit cards, making them versatile and accessible.

## Cons
**Limited fraud protection**: Debit cards may offer limited fraud protection compared to credit cards, and unauthorized transactions could tie up your funds during the investigation.

**Potential overdrafts**: Spending more than your available balance may result in overdraft fees, which can be costly.

**No credit building**: Debit card usage does not contribute to building a credit history or improving your credit score, unlike responsible credit card usage.

## Choosing the right payment method
What are some key points you should consider before choosing between both payment methods?

We’ve noted them for you below:

## Frequency and type of payment
Determine how often you make payments and the nature of these transactions. For regular bills like rent, utilities, loan repayments or subscriptions, direct debit can simplify your life by automating payments. Debit cards suit daily expenses like groceries perfectly.

## Budgeting and spending habit
Examine your spending habits and budgeting style. Debit cards act as a guardrail, allowing you to spend only what you have. This can curb impulse spending and help you stick to your budget.

## Security preference
Evaluate your security priorities. Debit cards offer security through immediate fund deduction and require a PIN for transactions. This reduces credit risk and enhances control. Credit cards typically have robust fraud protection, and zero-liability policies shield you from unauthorized charges.

## Best for the situation
Analyze the context of your payment. Debit cards are widely accepted and handy for day-to-day spending. Having stable finances and a preference for automated payments to avoid late fees or missed payments makes direct debit the most convenient option.

You stuck with us until the very end and so we’re sure you’ve learnt a thing or two.

As always, send us a message at support@irorun.com and let’s get you started on your first loan with your most preferred payment method.

Common features and differences of direct debit and debit cards

When it comes to loans, it’s always best to apply the art of negotiation. Don’t just take no for an answer. You can politely request your prospective lender’s audience and negotiate on the best terms that appeal to both of you.

Here are some tips to help you negotiate better:

## Understand your financial situation
The first step when negotiating loan terms is to do your best to understand what kind of financial situation you are in. This helps you assess your ability to repay the loan and helps identify loan options that work best for you.

Before you enter negotiations with a lender, it’s important to know how much you can afford to borrow. You can determine your borrowing capacity by doing checks on your income, expenses, debt, and savings.

Knowing how much you can borrow will help you negotiate loan terms that are realistic and affordable for you. That way, your lender is also ready to oblige.

## Research lenders and loan options
It never hurts to find out the many options available to you. It’s ill-advised to jump on the first loan available to you.

By researching lenders and loan options, you can pick out what lender has the best or closest loan options for you, identify the types of loans available and compare the benefits of each option.

This makes it easier for you to show that you have a bit of knowledge concerning loans, which can help you negotiate better terms.

You’re also able to identify factors such as your credit score or income level that could give you an advantage in the negotiation. Remember, you need to have sufficient knowledge to be able to negotiate smartly.

## Be prepared to make a counteroffer
You know how in a final-year project, you have to show the lecturers that you have done your research and defend your study. Well, negotiating loan terms is a bit like that.

Coming to the negotiation table with a well-researched proposal gives you more credibility and makes it easier to negotiate for better terms. If you can negotiate better terms, you may be able to save money on interest rates, fees, and other costs associated with the loan.

If you don’t make a counteroffer, you may end up with loan terms that are less favourable than what you could have negotiated.

## Focus on long-term costs
You can get a greater understanding of the loan and its effects on your finances by focusing on long-term expenses when negotiating loan terms. Most borrowers tend to concentrate on the interest rate and the monthly payments while negotiating loan terms.

You can clearly appreciate the true cost of borrowing money by taking the loan’s long-term expenses into account. This involves accounting for elements like the length of the loan, the total interest paid over the course of the loan, and any associated costs.

You can make use of this information to your advantage when negotiating loan terms by requesting a lower interest rate or a longer loan term to reduce the amount of interest paid over time.

## Keep your emotions in check
Emotions are great and all but when the situation calls for a calm head, they can cloud your judgment and lead you to make decisions that may not be in your best interest.

Keeping your emotions in check helps you focus on facts and figures of the loan terms, and be more objective in evaluating the terms being offered to you. This can help you to negotiate better terms, such as a lower interest rate, longer repayment period, or lower fees.

Lenders will be more willing to work with you if you keep a professional and respectful demeanor during negotiations.

## Final cross-checks
Carrying out final cross-checks on your negotiated loan terms is a no-brainer. This helps you confirm the accuracy of the information provided and helps you detect any error that may affect the loan terms.

Performing final cross-checks shows the lender that you are thorough and detail-oriented. This can demonstrate your professionalism and help build trust with the lender and is especially helpful if you are negotiating with a new lender or seeking a large loan.

We’re sure you’ve learnt a thing or two and we’ll be more than happy to get you started on your first loan. Send us a message at support@irorun.com!

Tips for negotiating loan terms with lenders

Ho! Ho! Ho! 

It’s the holidays and as you know MONEY makes the holidays even more fun right?

As always, Irorun wants all her Rockstars to make smart financial choices even during the holidays and that’s why we’ve carefully handpicked ways you can responsibly use a loan this holiday season

Check them out

## Determine the amount of money you need
It may seem very tempting to borrow more than what you need even if it wasn’t the holiday season. That’s why you have to stay strong and think it through with your head and not your heart.

Take the time to make proper calculations and beat down any form of long throat. So, you need to determine the amount of money you need and borrow only what you can realistically afford to pay back.

## Consider the loan term
The loan terms may just be the most important aspect of a loan and what you should put your focus on when taking out a loan, especially during the holiday season.

Always take the time to look through the loan terms properly and make inquiries about what you don’t understand. Never let your lender rush you through the loan terms as that may be a sign they are hiding something from you.

Consider the terms of the loan, including the interest rate, processing fees and the repayment schedule when you want to take out a loan.

## Compare loan offers
Don’t just pick the first loan offer that comes your way. Put in the effort to compare different loan offers, and remember that lenders have different loan packages and there will always be one that will fit you perfectly (or near perfect). Don’t let the rush of the holiday push you into settling for just any loan.

Every loan offer is different in one way or another, so compare them and find the best option for you.

## Avoid loan default
You should never make any plans to take out a loan with thoughts of defaulting on your mind. There’s a lot that could go wrong. Plus that’s wickedness na!

Make sure you understand the consequences of defaulting on the loan, including penalties, credit score damage, blacklisting etc. As you plan to take a loan for the holiday, ensure you include the loan repayments plan as well. There’s life after detty December.

## Make a budget
You can never go wrong with the good ‘ol budget plan. A budget can help you get all your expenses in order including your loan repayments.

Plan a budget for the holiday season and stick to your budget to avoid overspending and financial strain. The holidays naturally come with a lot of expenses and a hike in prices. Luckily, with a budget, you’re assured of a sustainable plan to help you maintain your finances and keep you in check while having a good time.

…

We wish you a happy (financially smart) holiday and as always, send us a message at support@irorun.com and let’s get you started on the holiday loan that’s just right for you!

How to responsibly use a loan this holiday


“Imagine losing money this period?”

Terrible thought right?

That’s why Irorun curated 4 financial scams you should watch out for. Because how can you avoid what you don’t know about?

## Phishing scams
Perpetrators of these scams usually send an email or text message with a link that can be used to access sensitive and private information such as passwords, security details etc. Which could spell a disaster for you. These emails are usually tailored to look like they come from an authentic source. Werey dey disguise.

They often tell a story to trick one into clicking on a link or opening an attachment. It could come as an unexpected email or text message that looks like it’s from a company you know or trust, like a bank or a credit card or utility company.

The message could be from a scammer, who might say they’ve noticed some suspicious activity or log-in attempts), claim there’s a problem with your account or your payment information, or say you need to confirm some personal or financial information.

To avoid falling victim, you should watch out for links in unexpected emails or texts from unknown sources.

Read more: [What is found in a typical loan terms and condition](https://irorun.com/blog/what-is-found-in-a-typical-loan-terms-and-conditions)

## Impersonation scams
Impersonation scams happen when an impersonator copies elements of a person, brand or organization for fraudulent purposes. These persons pretend to be someone else in a bid to deceive the unaware party. Another werey dey disguise.

These scams go beyond someone calling and asking for your bank details. Some of these scammers go as far as creating fake social media accounts or fake websites that copy the names, images, logos, or other identifying information of a person, brand or organization for deceitful purposes.

This is why it’s advisable to only access an organization’s website through a Web browser and not any link sent from a suspicious email address, look out for verified ticks on social media handles of public figures, brands etc. Remember it’s highly unlikely for government parastatals, brands or public figures to send you a personal message regarding your finances.

Read more: [Why you should read loan terms and conditions](https://irorun.com/blog/8-reasons-why-you-should-read-loan-terms-and-conditions)

## Charity organization scam
This is another popular financial scam that you should watch out for. Charity fraud schemes seek donations for organizations that do little or no work — instead, the money goes to the scammer’s pocket. While these scams can happen at any time, they are especially prevalent after high-profile disasters or pandemics *coughs in COVID-19 relief fund*. Scammers often use tragedies to exploit individuals who want to help or seek help.

Scammers know how readily we open our hearts and wallets to those who served and those rebuilding their lives after tragedies and so they abuse this kindness. They’re especially active during the holidays, the biggest giving season of the year.

And that is why proper investigations should be carried out before giving out hard-earned money to any organization seeking funds.

Read more: [Reasons why taking out a loan is  no longer considered scary](https://irorun.com/blog/7-reasons-why-taking-out-a-loan-is-no-longer-considered-scary)

## Lottery and job offer scam
This particular financial scam has to be the oldest in the book. Who doesn’t dream of winning a lot of money or a big prize? That’s why scammers still use the promise of a prize to steal money or personal information from unsuspecting individuals.

Scammers also present themselves as individuals or businesses posing to offer well-paying jobs or fast-money schemes. Whatever forms it comes as is usually just an attempt to access your sensitive details.

Unexpected prize and lottery scams work by asking you to pay some sort of fee to claim your prize or winnings from a competition or lottery you never entered. Smells like 419!

We understand that times are indeed hard and a new well-paying job may be what you desire, but we ask that you carry out proper research on any company that reaches out to you with claims of a job offer.

Read more: [Where to get an urgent 50,000 naira loan](https://irorun.com/blog/Where-to-get-an-urgent-50,000-naira-loan)

…

As always, Irorun wants you well-informed on matters that concern your money.

For more questions or loan assistance send us a message at [support@irorun.com](mailto:suppport@irorun.com)!

4 Financial scams to watch out for

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Irorun Blog

Common features and differences of direct debit and debit cards

Tips for negotiating loan terms with lenders

How to responsibly use a loan this holiday

4 Financial scams to watch out for

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