What Is a Debit Card?

A debit card is a physical payment card used to electronically access money in your bank account to make purchases or transfer money. Debit cards can be used online or at point-of-sale terminals to transfer money from your checking account to your intended recipient. Unlike a credit card, your debit card immediately transfers money from your active checking account. That means it cannot typically be used for purchases if your bank account lacks the required funds. If you have a new bank account, this is what you need to know about how a debit card works.

Consider working with a financial advisor as you manage budgeting and spending.

How Debit Cards Work

A debit card is a form of payment that enables you to make easy and secure payments online or through a payment terminal by transferring money directly from your bank account. Unlike credit cards, you aren’t pulling money from a credit line and instead only use the money you already have in a checking account.

A debit card can be used to withdraw cash from your bank account, as well as make purchases, by using the card at an ATM. Your debit card will work at ATMs, payment terminals or through payment platforms like Square or Google Pay. You can also use the card to transfer money via platforms like Venmo or Cash App.

Most banks will provide you with a debit card once you meet their qualifications for opening a bank account. You can elect not to receive a debit card, but if you made an initial deposit, the bank is likely to automatically issue your own card.

Types of Debit Cards

Not all debit cards work the same way, as some aren’t tied directly to your entire checking account. These are the most popular types of debit cards and how they work.

ATM cards: An ATM card is used to access your bank account at an ATM machine but isn’t used to make regular purchases.
Prepaid debit cards: A prepaid debit card can be tied to the bank account of your choice, but it is not issued by the bank that houses your account. They can be used to make purchases just like a regular debit card, but they are pre-loaded with money. This is the full amount you can use to make purchases. You have to reload the card when it runs out of money.
Regular debit cards: These cards access the available funds in your bank account at ATMs or through making purchases.
Electronic Benefits Transfer (EBT) cards: If you qualify for certain benefits with your state, you will be issued an EBT card to make purchases of specific items, such as groceries.

Debit Card Fees

A woman using a debit card to pay for a purchase.

Bank accounts have fees, and debit cards are no extension. The fees you pay can vary, depending on what bank you use and how you use your debit card. Pay close attention to the details of your account and the documentation that comes with your debit card so you know what you might be charged for. These are some common fees you may encounter when using your debit card.

Out-of-Network fees: This occurs when you use an ATM that isn’t within your bank’s network. The fee could be anywhere from $1 to $10 or more (especially at casinos). Based on general research, the typical out-of-network fee is nearly $5 per transaction.
Monthly fees: Some banks charge a monthly fee to use your bank account and all of its features, including your debit card usage.
Foreign transaction fees: If you use your debit card to make purchases or withdrawals outside of the U.S., you could incur a foreign transaction fee. The fee is typically charged as a small percentage of your transaction.
Overdraft fees: If you use your debit card to make a purchase that goes over your available balance, the bank may charge you an overdraft fee, often around $35.
Debit card replacement fees: If you lose your debit card, you may incur a small charge for replacement. Some banks will replace your card for free the first time it needs to be replaced.

While not a fee, you can also be charged an account hold when making some purchases with your debit card. This could lower your available balance in your checking account for a period of time.

Pros and Cons of Using a Debit Card

Debit cards have both pros and cons for everyday purchases. For one, there are no annual fees when using a debit card, and you’ll never be charged interest on the money you spend. It’s an affordable way to make purchases and you won’t have to worry about repaying anything later.

Convenience is also a major benefit of using debit cards. In today’s digital age, debit cards can be used nearly everywhere, from your local grocery store to your high school event. Debit cards are a universally-accepted form of payment that you can use virtually everywhere..

These cards aren’t without their cons, though. For instance, you may be charged a fee to use your debit card, depending on your transaction. Using a debit card frequently can also lead to overspending. It can be pretty easy to spend beyond your budget when transactions are happening directly on the spot.

Debit Cards vs. Credit Cards

Debit cards differ from credit cards in a few ways. A debit card pulls from the money you have already made available for the transaction. Meanwhile, a credit card uses a line of credit that you’re borrowing from. With a credit card, you can pay back the amount over time but will be charged interest.

Credit card debt can accumulate and be difficult to pay off because of the interest that is added every month. Debit cards are only using money that is already yours. In turn, you don’t have to borrow the funds from the bank. You also won’t be charged interest for using a debit card because the money is withdrawn immediately.

What to Do If Your Debit Card Is Lost or Stolen

If your debit card is lost or stolen, it’s best to notify your bank immediately. Many banks provide a banking app you can use to lock your card or report it as stolen. This will help prevent any fraudulent transactions from being made. Most banks will simply deactivate your card and send you a new one after you notify them.

If this happens to you, it is important to thoroughly review your recent transactions. Make certain no money was stolen out of your account via purchases or ATM withdrawals. Any money that was taken out of your bank account might be replaced, but this all depends on how early you notify the bank.

You often have two days to report the lost or stolen card. If you fail to do so, then you could lose to $500, depending on what was taken.

How to Protect Your Debit Card From Fraud

Protecting your debit card from fraud starts with monitoring your account regularly. By checking your transaction history through your bank’s mobile app or website, you can quickly catch any unfamiliar charges.

Many banks also allow you to set up transaction alerts by email or text, which notify you in real-time when your card is used. These tools make it easier to spot fraud early and report it before more damage occurs.

You should also be careful about where and how you use your debit card. Avoid entering your card details on unsecured websites or when making purchases over public Wi-Fi. When using an ATM, choose machines located in bank branches or well-lit, secure areas. Be aware of card-skimming devices that can capture your card information, and cover the keypad when entering your PIN. These simple precautions can help keep your card information safe from theft.

If your bank offers card management features in its mobile app, take advantage of them. Some apps allow you to temporarily lock your card, set geographic limits or turn off certain types of transactions. These settings can prevent unauthorized use if your card is lost, stolen or compromised.

Being proactive with these tools, along with practicing good security habits, can reduce your exposure to debit card fraud.

Bottom Line

A woman uses a debit card for an online purchase.

A debit card is a convenient banking tool used to make purchases anywhere credit cards are accepted. It can be an easy way to buy groceries or transfer money to others through the right platform. However, it’s important to keep track of your spending so you stick to your budget. This can help prevent instances of fraud in the future.

A financial advisor can help you create a long-term financial strategy using your bank accounts.

Banking Tips

When managing your money, you may want to create a financial plan for the future. A financial advisor can help you with this. Finding a financial advisor doesn’t have to be hard. SmartAsset’s free tool matches you with vetted financial advisors who serve your area, and you can interview your advisor matches at no cost to decide which one is right for you. If you’re ready to find an advisor who can help you achieve your financial goals, get started now.
Some people may prefer to build a budget on their own. To start the process, try SmartAsset’s budget calculator.