What is a debit card and how does it work?

What is a debit card?

Debit card definition: A debit card is a payment card that allows you to safely and easily shop online and in person by withdrawing money directly from your checking account. You don’t borrow on a line of credit like you would a credit card; the money on your debit card is yours. You can also use a debit card to access your cash at ATMs.

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In addition to cash registers and ATMs, debit cards work with mobile payment platforms such as Apple Pay, Samsung Pay and Google Pay, as well as with many money transfer apps such as Venmo and Cash app.

frequently asked Questions

When you open a checking account with a bank, you usually get a debit card. When you buy something with the card – for example by swiping it at a cash register or entering your account number at an online retailer – the money is debited directly from your checking account.

Yes, there are fees associated with some debit transactions, although these are often avoidable. For example, fees may be charged for using an ATM outside your bank’s network or for using the card in another country. Read on to learn more about common debit card fees.

A typical ATM card is only used to withdraw cash from an ATM rather than making purchases from retailers.

How to get a debit card

  • Open a checking account. Most banks and credit unions give you a free debit card when you open a checking account. Activate it by following the instructions you receive and setting up your PIN to use ATMs and make purchases.

  • Consider a prepaid debit card. If you don’t have access to a bank account, an alternative is a prepaid debit card, which you can also use to make purchases. Turn to NerdWallets list of the best prepaid debit cards for picks with useful features and low fees.

What is the difference between a debit and credit card?

Debit cards now require users to pay as the card will withdraw money directly from your checking account for purchases or ATM withdrawals.

Credit cards allow you to pay for your purchases later. You are essentially borrowing money from the credit card issuer knowing that you will be able to repay the money at the end of your billing cycle.

What is the difference between a debit card and an ATM card?

While purchases can be made and cash can be withdrawn from an ATM with a debit card, a typical ATM card is only used to withdraw cash from an ATM.

The exception is if the ATM card has a Visa or MasterCard logo. In this case, it works like a debit card and instantly withdraws money from your bank account.

What is the difference between regular debit cards and prepaid debit cards?

While traditional debit cards carry out a transaction from your bank account in real time with every purchase or ATM withdrawal, prepaid debit cards require you to top up the card in advance by cash, check, online transfer or a visit to a retailer.

Prepaid debit cards can be a great option for people who don’t have access to a bank account but don’t want to use cash to make their online purchases. Note, however, that prepaid cards will not help you build up credit.

Here are some typical debit card fees

Debit card transactions are not always free. Here are some costs to watch out for:

  • Off-Network ATM Fee: Typically around $ 3. This occurs when you use an ATM that is not on your bank’s network.

  • Foreign transaction fee: Usually 1% to 3% of the transaction amount. This is the case when making purchases or withdrawing from ATMs outside of the United States (see what big banks ask.)

  • Debit Card Replacement Fee: Generally a small fee, sometimes free (expedited delivery may cost more). This is the case if the card is lost or stolen and you need a new one in the mail.

  • Overdraft or Insufficient Funds Fee: Approximately $ 35but often lower for online banks and credit unions. This happens when you spend more than you have in your checking account. (See what big banks charge for overdrafts.)

  • Monthly fees: Some banks charge monthly account management fees for checking accounts and – in a broader sense – for debit card holders. However, these fees can usually be waived if you have a minimum balance or if you add a certain amount of money to your account on a monthly basis.

What to do if your debit card is stolen

Call your bank immediately. Depending on when you report the loss or theft to your bank, you can expect to be charged to a lost or stolen debit card. Here is the maximum amount you are responsible for depending on when you report the loss or theft:

  • Before fraudulent charges occur: $ 0.

  • Within two business days: $ 50 limit.

  • Within 60 calendar days: $ 500 limit.

  • After 60 days: No protection.

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