- Financial Term Glossary
- Debit Card
Debit Card
Debit card summary:
Debit cards are plastic or metal cards that cardholders can use to withdraw or deposit cash in and out of their checking account, or to pay for goods and services.
Debit cards don’t charge interest because funds aren’t borrowed. You can only spend the money that’s in the account the card is linked to.
Debit cards work with ATMs, gas stations, cashiers, mobile payment platforms like Apple Pay, Samsung Wallet and Google Wallet, and money transfer apps like Venmo and Cash App.
Debit card definition and meaning
Debit cards are payment cards that look just like credit cards, but are linked to your checking account. You can use a debit card to put money into your account or withdraw money from it. You can also use a debit card to make purchases in person or online. When you use one, you’re not borrowing money, and there will be no bill to pay. You can spend up to the amount that’s in your account.
Key concept:
A debit card is a plastic or metal card attached to a checking account that can be used to withdraw cash, deposit cash, or pay for goods and services.
More about debit cards
Debit cards look like credit cards and have some of the same features. They allow you to conveniently and safely make purchases online or in-person. You can also access cash using ATMs, cashiers, mobile payment apps, and money transfer apps.
Lost or stolen debit cards can be replaced. However, depending on the institution, you might be held responsible for unauthorized charges:
Before any fraudulent charges occur: $0
If you report the loss within two business days: $50 limit
If you report the loss within 60 calendar days: $500 limit
After 60 days: Unlimited liability
Let your bank know as soon as you know your card is missing. It’s a good idea to regularly monitor your account for unauthorized charges. If your bank offers alerts, set them up so that you’ll be notified quickly about unauthorized activity on your account.
Debit cards: a comprehensive breakdown
Debit cards are attached to checking accounts and are usually provided free of charge to account holders. They typically feature major credit card brand logos and can be used anywhere credit cards are accepted.
The spending limit on a debit card is the balance in your account. Your transaction will likely be declined if it’s for more than the amount of money you have. At some banks, you could set up overdraft protection that allows you to spend more money than what’s available in your account, for a fee.
Debit card alternatives
Prepaid debit card
A prepaid debit card isn’t attached to a bank account, and you don’t need a bank account to use one. You purchase the card and fund it with cash or electronic money transfers. Like a traditional debit card, you can use a prepaid card to make purchases or withdraw cash.
Prepaid debit cards don't help you build credit like secured credit cards. All prepaid card charge fees, but the kinds of fees and the amounts vary widely. For example, some charge a monthly maintenance fee, while others charge for each transaction. Check several options before choosing a card.
ATM card
People who have savings accounts but not checking accounts can also get an ATM card to make withdrawals more convenient. With an ATM card, you can withdraw or deposit cash. If your ATM card has a major credit card logo, you can use it like a regular debit card.
Debit cards vs. credit cards
The main difference between debit and credit cards is that credit cards involve borrowing and could help you build credit. However, credit cards also make it easy to spend money that you don't have. Debit cards make spending easier and safer than carrying cash.
Debit cards can make sticking to a budget easier because you're spending your own money.
Debit Card FAQs
Can you use a debit card to reserve rental cars and hotels?
Yes, depending on the company, you may be able to reserve your rental car or hotel with a debit card. However, there might be some restrictions. You may have to pay a security deposit. And the hotel or rental agency may put a hold on some of the funds in your account to make sure the charges will go through. You might have to prepay for your rental or hotel stay.
Can you get rewards or cash back with a debit card?
Yes, some debit cards offer rewards or cash back. Card issuers earn money, in the form of processing fees that merchants pay, anytime you use your card to make a purchase. So they want you to use your card, whether it's credit or debit. And it's fairly easy to search online and find debit cards with rewards or cash back benefits.
What do I do if I fall for a financial scam?
If you fall for a financial scam, or if someone even tries to scam you, act fast. The FTC says:
If a credit or debit card is involved, contact the issuer and report the transaction as fraudulent.
If a payment app is tied to a card, report it to the card issuer and the app company.
Contact your bank about unauthorized transfers from your account.
Contact any wire service (like Western Union or MoneyGram) that was used and ask them to reverse the transaction.
If you sent cash through the mail, contact the postal service and ask them to intercept the package.
If you pay someone in crypto, the transaction generally cannot be reversed.
If your identity was stolen, go to IdentityTheft.gov to report it and start your recovery process.
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