Debit Cards: Everything You Need to Know
A debit card is a payment card that allows you to pay for purchases and withdraw cash from your checking account.
In other words, it is similar to using cash, but without carrying any physical money. It can be used for both online and offline transactions. For online transactions, the user will need to enter their 16-digit card number, expiry date, and CVV code. For offline transactions, the user will just need to swipe or insert their card into a card reader and enter their PIN.
There are many benefits to using a debit card. For one, it is a convenient way to make purchases without having to carry around any cash. Additionally, it can help you keep track of your spending as all transactions will appear on your bank statement.
Finally, if your card is lost or stolen, you can just go ahead and cancel it and get a replacement without losing any money.
A debit card works much like an ATM or bank card, but it’s more convenient because you can use it anywhere that accepts Visa or MasterCard.
In today’s world credit and debit cards are two of the most popular ways to pay for things, but they work in very different ways. While debit vs credit card lets you access your own money immediately and directly from your bank account, credit cards, on the other hand, allow you to use a line of credit.
In case you’re interested in getting a debit card, most banks will offer them to customers who open up a new account.
What Is a Debit Card?
A debit card is linked to your checking account and allows you to withdraw cash or make purchases using the funds in your account. Mastercard, Visa, Discover or American Express debit cards can be used wherever paying with a card is accepted. When you use your debit card, the funds are transferred from your checking account to the merchant.
It’s similar to a credit card in that it acts as an extension of your bank account. Payments made with your debit card come directly out of your checking or savings account.
They have become so popular because they are really convenient. Not only do they allow you to make purchases without carrying cash, but they also offer protection against fraud and identity theft. When you use a debit card, you are not responsible for any unauthorized charges made to your account. Although, there is a liability of up to $50 if you report your card stolen within 2 days.
How Do Debit Cards Work?
If you have an opened checking account at a bank or credit union, you probably already have a debit card. If not, all you need to do is request one from the institution you have an account in. Some prepaid cards also function as a debit card and can be purchased at many retail locations.
Once you make a purchase the funds will be deducted from the account balance immediately. This is where they differ from credit cards, which allow the cardholder to borrow money against the purchase and pay it back over time with interest.
As a result of paying the outstanding amount immediately, there are many no-fee debit cards you can get which can be a good option for avoiding any additional fees.
However, some banks may offer overdraft protection on their debit cards, which means that if you try to spend more money than you have in your account, the bank will cover the difference. But there will likely be fees associated with this service.
How to Get a Debit Card
In case you don’t want a credit card, but also don’t like just carrying your cash around, you can just go ahead and apply for a debit card which can be a great solution for this.
Here is how to get one:
- Go to a bank and ask for a debit card. This is the most common way to get it. If you do not have any opened account, the bank will ask you for some personal information, like your address and your Social Security number. When you open a checking account, your bank or credit union will give you the option to add a debit card to your account.
- Request a card. If you already have an account but were never before interested in these cards, you can just go and request it from your bank or credit union. You may be able to do this online, over the phone, or need to go in person at your local branch.
And, that’s it! Getting a debit card is much easier than getting a credit card, so it will only take a few steps and a couple of days of waiting and you should receive your card in the mail.
Debit Cards: Advantages and Disadvantages
Debit cards are financial instruments that allow bank customers to access their account funds in order to make purchases or withdraw cash. Nonetheless, like any other tool of this kind, they do have some pros and cons attached to them. Here, we will discuss some of the most common ones.
Be sure to carefully weigh it all out so you are surely making the best possible decision for yourself.
- Convenience. A debit card is easy to understand and can be used anywhere cards are accepted. Also, they are a good alternative to carrying cash.
- Safety. Debit cards are safer than just deciding to carry cash around, as they can be quickly canceled if lost or stolen. This also goes for fraud protection, so if your card is stolen and someone is trying to use it, you can report it to your bank and get a replacement card.
- Rewards. Some banks offer debit card rewards programs for customers who use their cards frequently.
- Lower cost. If you were to choose a credit card, you will typically have higher interest rates and fees than with choosing a debit card.
- They can help you stay within your budget. With debit cards, you can only spend the money that you have in your account. This can help you avoid overspending and getting into debt.
- You can easily track your spending. Banks usually offer online banking services that allow you to see all of your transactions in one place.
So, if you are looking for a convenient and safe way to pay for purchases and access cash, a debit card may be a good fit for you.
But, before you decide to run to your bank and get one, let’s look at some disadvantages of using a debit card:
- Overdraft fees. If you spend more money than you have in your account, you will likely be charged an overdraft fee by your bank. These fees can add up quickly if you’re not careful.
- Less fraud protection. Even though they do offer protection, this still may be less fraud protection than you can get with a credit card.
- ATM fees. Depending on the ATM machine you choose to withdraw the cash from, you may be charged a fee by your bank for using an ATM outside of your network. Some banks also limit the amount of money you can withdraw from an ATM each day. This can be inconvenient if you need a bigger amount of money for an emergency or unexpected expense.
Debit Cards vs. Credit Cards
You now may be wondering what is the difference between a debit card and a credit card and which one is better suited for you.
In short, a debit card is linked to your checking account, while a credit card is linked to your line of credit. This means that if you use your debit card for purchases or cash advances, the money comes directly out of your checking account.
Credit cards will only be charged when you make purchases. After making those payments (plus interest), you’re left with a debt that you must pay off over time by paying down the balance owed on your statement. You will also be responsible for paying off any additional fees associated with late payments or other miscellaneous charges.
Debit cards can be used for both purchases and cash withdrawals from ATMs. However, they cannot be used as easily as credit cards when it comes to paying bills. Many bill payment services require that users provide access codes so they can withdraw funds directly from their accounts each month.
Credit cards can also be a good choice for people who want to build their credit history. They offer a bigger variety of rewards programs that can give you cash back or points that can be redeemed for travel or other perks.
Debit Cards vs. Cards
There are many different card types out there. Here we will provide you with a bit more information on why debit cards are generally quite different from other types.
Debit cards are linked directly to your checking account, so spending is limited to the amount of money that you have available in your account. This can be a good thing if you’re trying to stay within a budget, but it can also be a hassle if you suddenly need to make a large purchase and don’t have enough money in your account.
Debit card transactions are processed differently than credit card transactions. The funds are taken out of your account immediately so overdrafting your account can be quite easy.
On the bright side, they do tend to have much lower interest rates than other card types, so you will essentially only be paying what you spent.
Don’t forget that you can also check your debit card balance easily if you have a mobile app linked to your card. Many banks offer these services without any additional charges.
Debit Cards vs. ATM Cards
Debit cards and ATM cards are both just a piece of plastic that can be used to access funds in a bank account. However, there are some key differences between the two types of cards.
Debit cards are linked directly to a checking account, while ATM cards are linked to a savings account.
Debit cards can be used for both point-of-sale purchases and cash withdrawals. So, with them, there is no need to pay for an item in cash. They typically have more features and benefits than ATM cards, such as rewards programs, online pay, and fraud protection.
An ATM card is used to withdraw cash from an ATM machine, but cannot be used at retailers or merchants.
Do Debit Cards Have Fees?
Debit cards have fees just like any other type of card, but they are often much lower. Many banks charge a monthly fee for the privilege of having a debit card. Some may even charge a fee for every transaction you make with your card and some will charge you for withdrawing cash at an ATM machine.
For example, a debit card may have a $1 fee for each purchase, while a credit card may have a 3% fee.
In case you plan to go abroad, banks will also slap on international transaction fees, overdraft fees, and other charges that can add up quickly if you don’t take the time to examine it all.
All of these additional fees and other charges you will need to pay can be found in the agreement you signed before opening the account and getting a card, so read it carefully.
A debit card is a payment method that allows you to pay for goods and services without using a check, credit card, or cash. The money from your account is taken for the purchase amount immediately and goes directly into the merchant’s account within 24 hours. You can use a debit card for purchases at ATMs, online, over the phone, or in person.
The bottom line is that they are a convenient way to access your money and can help you keep track of your spending. However, it’s important that you take the time to understand how these cards work before you actually decide to start using one.