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How does a debit card settle a purchase?
AIt moves money from the bank account to the merchant
BIt lends the customer the amount until the month ends
CIt draws on an overdraft arranged with the merchant
DIt transfers the purchase into a time deposit account
Answer & Solution
Correct answer: A. It moves money from the bank account to the merchant
1. A debit card lets a customer transfer money from their own bank account directly to the account of a merchant.
2. The customer is spending money that is already theirs, so nothing is borrowed.
3. This is what separates a debit card from a credit card, where the bank pays the seller and lends the amount to the customer.
4. No deposit is locked away in the process, so no time deposit is created.
_Source: OpenStax Introduction to Business (CC BY 4.0), Ch 15 "Understanding Money and Financial Institutions", section 15.3 U.S. Financial Institutions_
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