What Is a Debit Card?

A debit card, which many people call a “bank card” or “cash card,” is a payment card attached to a checking account and pulls funds directly from the account as you use it. Debit cards are issued by banks and credit unions when you open an account as a way to access your funds. 

How Does a Debit Card Work?

When you open a new bank account, you will be issued a debit card. It is a payment card that looks like a credit card but does not function the same way. Your debit card will have a Visa or Mastercard logo on the front, depending on which network your card is affiliated with, and a 16-digit card number used when making online purchases or payments. Like a credit card a debit card has numbers on the front, a magnetic stripe on the back, and a chip on the side. The magnetic strip and chip are how the information to your account is accessed when you swipe the card at a point-of-sale terminal. 

When you purchase an item, you will insert the chip into the reader, allowing the payment system to access your bank account to verify if there is enough money available for the purchase. Once the system has confirmed sufficient funds available, the transaction is approved, and that amount of money is deducted from your available bank account balance. 

If you want to access cash in your bank account, you will use an ATM or automated teller machine. An ATM will access your account information and verify if the money requested is available, and if it is, the ATM will dispense the requested cash.

Depending on the type of account you have, your debit card will not work if there are not enough funds in the account to complete the purchases. Some bank accounts have “overdraft protection,” which we will discuss further.

How to Use a Debit Card?

Using a debit card is simple, so we will go through the different debit card processes step-by-step. 

How to use a debit card point-of-sale transaction

1. Take your item to the register and once it is rung up, either insert the chip end or swipe your debit card at the card reader. 
2. Follow the prompts on the card reader screen. Most will ask for your 4-digit PIN, which you set up when you first get the card. 
3. After entering your pin, it will ask you to confirm the amount, verify it is correct, and press ok. 
4. Your transaction is complete. Keep your receipt and verify that the purchase is correct in your bank’s application. 

How to Use a Debit Card at an ATM?

1. At the ATM, you will insert your debit card into the slot and select the language you speak.
2. Enter your PIN when the ATM prompts you. It will not allow you to access your account information without the correct PIN.
3. Follow the prompts, and it will give you the option to check your balance or withdraw cash from your checking. Select withdraw cash.
4. The screen will ask you to enter the amount of cash you would like to withdraw. Enter in the amount to proceed to the next step.
5. Your transaction will be approved if you have enough funds left in your available balance. Cash is dispensed along with your ATM card and a receipt.

How to request Cash Back using a debit card at the point-of-sale (register)?

Many registers will allow you to withdraw cash off your debit card with purchase. 

1. After the purchase is rung up, insert your card into the reader. If it allows Cashback, you will see a prompt that asks Debit or Credit; select debit so you can receive Cashback because credit will not enable Cashback with your purchase. 
2. It will ask you to choose Cashback or No; select Cashback.
3. Now select an amount. Many card readers will give you specific dollar amounts such as $20, $40, or $10, so choose how much cash you need. 
4. You will be prompted to enter your PIN.
5. After entering your PIN, it will confirm the total amount of the purchase with the cashback amount. If the purchase is $5 and the Cashback is $20, it will ask you to confirm $25
6. Once completed, the cashier will give you cash in the amount you requested.

How to make an online purchase with your debit card?

Have you ever wanted to purchase something online but are not sure if you could use a debit card? You are in luck because you can use debit cards to make purchases online, and we will discuss the steps below. 

1. Once you have selected the item, go to the checkout area of the webpage. 
2. You will be asked to review the order and enter your billing information. Billing information is the name and address associated with the credit card. 
3. Once the debit card billing information is entered correctly, you will be asked to enter the shipping address where you want the item shipped.
4. The payment information section will ask you for the debit card number, expiration date, and name, usually located on the front of the card. Lastly, it will ask if the CVV number can be found on the back near the magnetic strip and is a 3-4 digit number. 
5. Once you have completed the information correctly, it will process your payment. It all has to be correct, or it will decline the charge, and you will need to review the entered information. 

Debit card fees

Debit card fees will vary based on the type of account you have. Most debit cards do not have annual charges that you will need to pay. The most common costs associated with debit cards are ATM fees for out-of-network ATM withdraws. 

Here is a list of fees debit cards can be charged. They will vary between banks. 

1. ATM fees, out of network ATM usage – Your bank may charge a fee of $2-$4.50 if you use an ATM that is not in their network. The ATM can also charge you a separate fee for using their network, so you can pay as much as $8 in fees to use an out-of-network ATM.
2. Overdraft or Non-Sufficient Funds fee or NSF – These fees average $35 and are charged based on your bank’s policy. An overdraft fee is when you make a purchase, and it is approved, but there are not enough funds in your account to cover the purchase. A Non-Sufficient funds fee occurs when an automatic debit or purchase hits your account, and the bank chooses to deny it because there is not enough money in your account to cover the debit. These fees can be assessed daily depending on your bank, so review your accounts policies.

Types of Debit Cards

Regular debit card

A regular debit card is attached to a bank account and used for in-person or online purchases and ATM withdraws.

ATM card

An ATM is attached to a bank account but can only be used at an ATM to withdraw cash from the account. These cards cannot be used to make any purchases. 

Prepaid debit card

A prepaid debit card is not attached to a specific bank account but has many of the same functions. You purchase temporary prepaid debit cards at many grocery stores and load funds onto the card at the register. 

These accounts are used for direct deposits, online and in-person purchases, and unlike a traditional bank account, you cannot overdraw funds. These prepaid debit cards will not allow you to purchase if all the funds are not available to cover the purchase. 

Electronic benefit transfer card (EBT card)

Electronic benefit transfer (EBT) cards are when government benefits are applied to a debit card, such as social security or SNAP (food stamp) benefits. Social security cardholders use them for in-person and online purchases like a traditional debit card, but SNAP nutritional assistance EBT cards are used at approved stores on food items.

How to Get a Debit Card

You can obtain a debit card by applying for a bank account at a local bank branch. Most checking accounts offer a debit card, but you may want to verify with your bank. If you do not want a traditional bank account or do not qualify, there are prepaid debit cards. 

You can order a prepaid debit card online, or a temporary card can be purchased for a small $2-$5 fee at Walmart, Walgreens, Gas stations, and Check Cashing stores. Once you receive your prepaid debit card, you will assign a PIN and may have a monthly fee, or per-transaction fee, depending on the fee structure. 

Advantages and Disadvantages of a Debit Card

Advantages

• Convenient. You can use debit cards almost anywhere for both in-person and online purchases. Most banks offer apps that will track all your spending with your debit card and notify you anytime it is used.
• Fees. Debit cards do not have a fee for use, like many credit cards may have an annual fee.
• Security. If you protect your PIN, debit cards offer a secure way to protect the money in your bank account while always having a convenient way to access the funds. 

Disadvantages

Fees. While debit cards have no annual fees for using the card, they have out-of-network ATM withdrawal fees, overdrafts, and NSF fees.

Security. There are specific rules for how you safeguard your PIN. If you share it with someone who uses it on an unauthorized purchase, you are responsible since you gave them the PIN, even if you did not approve it.

Debit Card vs. Credit Card

Similarities. 

• Both used to make purchases online and in person.

Differences

• Credit cards have a line of credit you can use and then pay off each month or make the minimum payment if you cannot pay the entire balance.
• Debit cards do not have interest added because you are using funds from your bank account, while a credit card is borrowing money from the bank until you pay the amount off.
• Credit cards can help you establish credit if you are responsible.
• Credit cards can cause debt issues.
• Debit cards do not build credit but cannot cause debt issues.

FAQ

Are debit cards protected from fraud?

“The Electronic Fund Transfer Act (EFTA) (15 USC 1693 et seq.) of 1978 is intended to protect individual consumers engaging in electronic fund transfers (EFTs). EFT services include transfers through automated teller machines, point-of-sale terminals, automated clearinghouse systems, telephone bill-payment plans in which periodic or recurring transfers are contemplated, and remote banking programs. ” 

The EFTA does have protections that can assist consumers with incorrect transactions and errors and limits the cardholder’s liability if their card is stolen or a victim of fraud. Some specific terms and conditions must be met to qualify for the protections. If your debit card is stolen or lost, it is your responsibility to contact the bank as soon as you are aware, or you can be held responsible for any charges. 

Can you rent a car with a debit card?

Certain rental car agencies will accept a debit card. Each rental car company has specific terms and conditions, such as a soft credit check if you do not have a credit card and only a bank debit card. Policies can also vary depending on the rental agency location, such as different rules if it is located in an airport. Call your rental car agency before you make a reservation to clarify their rules on debit cards.

How old do you have to get a debit card?

To get a debit card without a parent or guardian, you must be 18 years old. Banks require you to be 18 to open an account, but there are specialty debit card accounts that parents can open up for kids between 6 and 17 years of age, like the Chase First banking debit card or the Greenlight card.

What is the CVV on a debit card?

The CVV is a 3 or 4-digit number on the card used to verify that you are physical with the card when making online purchases. They are a fraud deterrent, so someone with just a debit card number and expiration date will not be able to complete online purchases without the physical card because the CVV is on the back of the card in a nondescript location.

What is a routing number on a debit card?

There are no routing numbers on a debit card. Routing numbers are on a check, allowing the banking system to recognize what bank you belong to. A debit card number has 16 numbers on the front. The first 6 digits are the bank identification number, and the last 10 digits are the unique number associated with your bank account. These are not your actual bank account number but the 10 digits assigning your debit card to your bank account.

Is a debit card the same as a checking account

Checking accounts have more features than debit cards. Checking accounts let you transfer money and deposit funds into the account. You can access a checking account with checks, debit cards, and ATM cards. Meanwhile, a debit card is a way to access the funds in a checking account when you make online or in-person purchases. 

Conclusion

Debit cards are convenient for accessing checking account funds through point-of-sale purchases or ATM cash withdrawals. Most people have a debit card, but options are available if you do not qualify for a traditional debit card or do not want a bank account. 

Online FINTECH (Financial Tech services providers) such as Chime or ONE online banking services have made prepaid cards and checking accounts available for every person regardless of credit or past banking history. Identifying what you need and want in your debit is essential before committing to a product or bank.