Here is a list of our partners and here's how we make money. Debit card definition: A debit card is a payment card that lets you make secure and easy purchases online and in person by drawing money directly from your checking account.
You're not borrowing from a line of credit like you would with a credit card; the money on your debit card is your own. You can also use a debit card to access your cash at ATMs.
When you open a checking account at a bank, you typically receive a debit card. When you use the card to buy something — such as by swiping it at a cash register or entering its account number at an online retailer — the money is pulled directly from your checking account. Read on for more about common debit card fees. A typical ATM card is used only for withdrawing cash from a machine, rather than making purchases at retailers. Open a checking account.
Most banks and credit unions give you a free debit card when you open a checking account. Consider a prepaid debit card. Check out other related products and accounts. If you want to build credit, a secured credit card may be a better fit for you. Frequently, those without access to banking services use prepaid debit cards to receive funds and then spend money. Some employers issue paychecks through prepaid debit cards. Some cities even issue government benefits like unemployment or food assistance funds through prepaid cards.
When you open a checking account, the financial institution typically issues you a debit card automatically, or you may need to request one with your account. If you choose to use a prepaid debit card, though, be aware that some charge monthly fees that can cut into your deposits.
Cards get lost and stolen every day. Some banks even allow you to report this online through their online banking portal, while others require that you call. Sometimes the bank will freeze your card, just in case you find it. Other times, the bank will immediately deactivate that debit card and send you a new debit card. Debit cards give you the flexibility of paying with a card instead of writing a check, both online and in person. One or a combination of the three can help you gain the flexibility you crave with the seamless access to cash your daily activities require.
She has worked as a personal finance editor, writer, and content strategist covering banking, credit cards, insurance and investing. As a small business owner and former financial advisor, Daphne has first-hand experience with the challenges individuals face in making smart financial choices.
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You may have a debit card in your wallet, but have you ever stopped to think about how it works? The amount of money that can be spent with it is tied to the account size the amount of funds in the account. In a sense, debit cards work as a cross between ATM cards and credit cards. You can use them to get cash from a bank's automated teller machine, as with the former; or you can make purchases with them, like the latter.
In fact, many financial institutions are replacing their plain vanilla, single-purpose ATM cards with debit cards that are issued by major card-payment processors such as Visa or Mastercard. Such debit cards come automatically with your checking account. Whether being used to obtain cash or to buy something, the debit card functions in the same way: It draws the funds immediately from the affiliated account. Debit cards usually have daily purchase limits as well, meaning you can't spend more than a certain amount with them in one hour period.
Debit card purchases can be made with or without a PIN. By and large, debit cards don't cost anything extra: There are no annual membership fees or cash-advance charges. However, they don't always allow you to escape fees completely: If you withdraw cash from an ATM that's not from—or affiliated with—the bank that issued your debit card, you may be well charged an ATM transaction fee. What if you use the card to spend more than you have in your account?
You can get hit with insufficient funds charges, similar to those incurred by a bounced paper check. If you've registered for overdraft protection, you will incur overdraft fees. You might also incur a replacement card fee if yours is lost, damaged, or stolen, and a foreign transaction fee, if you buy something in a foreign currency.
Note: All this applies to regular debit cards, which pay with funds drawn on your checking account. A prepaid debit card , which has a set amount of money stored on it, is different—in fact, it's almost a different animal altogether. A prepaid debit card is akin to a gift card : It allows you to spend a sum that's been loaded onto the card until the balance is used up. Some of them are refillable, so they can be used indefinitely, like regular debit cards.
Unlike their regular cousins, though, prepaid debit cards often come with a passel of extra charges: monthly fees, transaction fees, ATM fees, reloading fees, foreign transaction fees—sometimes even a fee for checking your card balance. Given that many bank debit cards are being issued by credit card companies, the distinction between credit and debit cards can seem as thin as, well, a piece of plastic.
Aside from the word "debit" on its front, a debit Mastercard looks identical to a credit Mastercard, for example, and "can be used anywhere Mastercard is accepted. A debit card bearing the logo of a credit card issuer offers many of the same consumer protections , such as not holding you liable for fraudulent purchases made by someone swiping your card number.
But credit cards and debit cards work in fundamentally different ways. Using a debit card to make a purchase is like writing a check or plunking down dollar bills: You're paying for the item then and there, drawing on funds in your bank account.
When you use a credit card, you're essentially borrowing money from the card company for the item. It pays the merchant, then bills you for the amount. You repay it when you get your monthly statement. If you don't pay the whole amount, you pay interest on the remaining portion, as you would with any loan.
You can get cash with both debit and credit cards. But again, when you get it from a credit card you're borrowing money—as the term for it, "cash advance," implies. If you use your credit card to get cash at an ATM, the money isn't coming out of your bank account, it's coming from your credit card account. And you pay interest if you carry a balance—that is, don't pay it back right away or sometimes even if you do.
You don't carry a balance on a debit card, because each and every time you use it, you're paying for the item in full, or taking out money that already belongs to you. The big advantage is, debit cards don't put you into debt—you can't spend more than you have. The general fear about debit cards is the risk of becoming a victim of fraud because the card is directly attached to your bank account.
But banks have anti-fraud measures in place to keep your card and your account secure. The cards currently being issued by banks have an embedded chip that drastically reduces the risk of fraud. PINs and security codes also help to secure your account. The interest charges you save by spending carefully and choosing debit over credit might even free up money you can use to build savings.
Jared Nigro contributed to the reporting for this article. We fact-check every single statistic, quote and fact using trusted primary resources to make sure the information we provide is correct. Every day, get fresh ideas on how to save and make money and achieve your financial goals. Sponsored Links by Zergnet. Sign up for our daily newsletter for the latest financial news and trending topics. For our full Privacy Policy, click here. Advertiser Disclosure.
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