# What Is a Debit Card and How Does It Work?

## What Is a Debit Card?

Debit cards might look just like [credit cards](https://www.investopedia.com/terms/c/creditcard.asp), but when you use one, money is withdrawn from your checking account. Debit cards, also known as bank or check cards, typically can be used anywhere credit cards are accepted and to withdraw money from an [ATM](https://www.investopedia.com/terms/a/atm.asp). In many ways, using a debit card is like carrying cash since you have limited funds to draw from.

### Key Takeaways

*   You can use a debit card to make payments directly from your checking account or to take cash from the account at an ATM.
*   You might need to enter a personal identification number (PIN) or sign for your debit card purchase.
*   Although debit cards usually don't come with many rewards or benefits, it's possible to find offers like cash back or [interest-earning checking accounts](https://www.investopedia.com/best-high-yield-checking-accounts-5070332).

![Debit Card](https://www.investopedia.com/thmb/d5qDsl9nrg6tghYgOhPUfuUzyNU=/1500x0/filters:no_upscale():max_bytes(150000):strip_icc()/debit-card-4198112-1-40a2133a22f646b7907f1940ce35df77.jpg)

*— Investopedia / Joules Garcia*

## How a Debit Card Works

When you're issued a debit card, it doesn't come with a spending limit the same way a credit card does. This is because a debit card is linked to your [checking account](https://www.investopedia.com/best-high-yield-checking-accounts-5070332). In most cases, the amount of money you've deposited into the checking account is your spending limit.  

When you use your debit card to make a purchase, you may have to enter a personal identification number (PIN) or sign for the purchase. Then, the merchant's payment system pulls the funds directly from your checking account. So, if you go over the amount of money in your account, you could be charged an overdraft fee.

Since debit cards strictly allow you to access your money, not credit, you don't have to make [minimum payments](https://www.investopedia.com/terms/m/minimum-monthly-payment.asp), and you're not charged interest for borrowing money. People who are trying to budget might find debit cards help them stick to a [financial plan](https://www.investopedia.com/terms/f/financial_plan.asp).

That said, there are also some restrictions with debit cards. Your bank might have daily purchase limits you can't exceed, and you might be limited in the ATMs you can use. For instance, you might be charged an out-of-network fee for withdrawing cash from an ATM that isn't affiliated with your bank or credit union.

> **Tip**
>
> Debit cards are a popular financial product for people new to budgeting and personal finance. For this reason, debit cards are commonly used by teens and young adults who've just opened their first bank accounts.

## Debit Card Fees

With a debit card, you don't have to worry about the fees typically levied by credit cards (like cash-advance charges), but there are a couple potential costs you ought to be aware of, including:

*   **ATM transaction fees** for using an ATM that's not affiliated with your bank or your bank's network
*   **Insufficient funds fee** (also called a [non-sufficient funds (NSF) fee](https://www.investopedia.com/terms/n/nsf.asp)) if you use your debit card to spend more than you have
*   [**Overdraft fee**](https://www.investopedia.com/terms/o/overdraft.asp) if you have [overdraft protection](https://www.investopedia.com/terms/o/overdraft-protection.asp) but spend more than you have in your account
*   **Replacement card fee** if you card is lost, damaged, or stolen and you need a replacement
*   **Foreign transaction fee** if you make a purchase abroad and the currency is converted, usually 1% to 3% of the purchase amount
*   **Prepaid debit card fees** such as monthly maintenance fees and activity fees that come with loading and using a [prepaid debit card](https://www.investopedia.com/ask/answers/042315/how-do-prepaid-debit-cards-work.asp)

## How to Get a Debit Card

Before you get a debit card, you need to have a checking account at a bank or credit union. Online financial institutions may also offer them. When you open an account, the financial institution will usually issue you a debit card automatically. If you didn't get one, you can usually request a card from customer service.

Once you receive your debit card, follow the prompts on the card to activate it. Typically, you call a number, log into your online account, or activate the card on your bank's mobile app. As part of activation, you'll need to select a PIN. Sometimes, you'll have to provide this PIN when making transactions, so choose a number you won't easily forget.  

## Debit Card vs. Other Types of Cards

Different types of cards have different functions, so it's worth considering each to determine which is best for your needs:

*   **Credit card**: Instead of withdrawing money from your account, you borrow from a line of credit when you use a credit card. You may earn rewards and benefits like cash back, insurance coverage, or discounts with select merchants. Credit cards offer flexibility and purchase protection, which can come in handy for big-ticket purchases.
*   **ATM card**: These cards work only at ATMs. You cannot use an ATM card to buy something from a retailer like you can with a debit card.
*   **Prepaid debit card**: If you don't have a checking account but like the idea of using a debit card, you can purchase a debit card and load money onto it. You won't be able to charge purchases beyond the amount you load, so it can be a useful way for young adults and those tracking their finances closely to stick to a budget.

### Debit Card vs. Credit Card

Though they look alike and function similarly at the point of sale, these are two completely different financial products. Debit cards draw funds from your checking account, but credit cards pull from your [line of credit](https://www.investopedia.com/terms/l/lineofcredit.asp). Since you're technically in debt to the financial institution that issued your credit card, you owe them money and are charged interest. Debit cards, meanwhile, don't require repayments because you're using your own funds.

Credit cards may have income and [credit score](https://www.investopedia.com/terms/c/credit_score.asp) requirements that debit cards don't have. People with fair or poor credit might struggle to qualify for a credit card or have to pay more in interest to use one. Debit cards are available to anyone who has a checking account.

Debit cards have a lot going for them, but they're considered less secure against fraud. Many credit cards offer identity theft coverage and purchase protection, so you may be reimbursed for fraudulent purchases made with your card.

Credit cards may be a better option if you'd like to finance a large purchase or you want to be rewarded for your spending. Debit cards usually don't have [rewards programs](https://www.investopedia.com/ask/answers/110614/what-are-some-examples-common-credit-card-reward-program-benefits.asp), but credit cards allow you to earn points for cash back, financial products, travel, and more.

### Debit Card vs. ATM Card

While you can use both cards at ATMs to withdraw cash, you can't use the latter card anywhere but an ATM. Because they're less flexible than debit cards, ATM cards are usually only issued to people who have savings accounts but no checking account. If you have both a checking and [savings account](https://www.investopedia.com/terms/s/savingsaccount.asp) at the same financial institution, you can usually access each account at an ATM using your debit card.

### Debit Card vs. Prepaid Debit Card

To use a prepaid card, you pay to load money onto it. You can use the card like a debit card, but it's not linked to a checking account. Instead, once you run out of funds, you simply load more money. The downside to prepaid debit cards is they often charge high fees for transactions or loading money, whereas debit cards don't pass on standard transaction fees to cardholders.  

## Tips on How to Use Your Debit Card

Debit cards are straightforward to use, but there are some simple strategies for using yours effectively and keeping it safe.

*   **Use your debit card to take out cash**: Instead of going into a bank, head to the ATM and use the cards to pull funds out of your account.
*   **Make purchases or get cash back**: If you don't want to use credit or cash to pay, use your debit card. Some retailers also give the option of getting cash back, so you can skip a trip to the ATM.
*   **Sign up for text or email alerts**: Ask your bank to send you alerts when your account balance is at a specific amount or when large purchases are made.
*   **Keep the PIN secure**: When you set up the card, choose a PIN that's easy for you to remember so you don't have to write it down. Don't share the PIN with anyone.
*   **Report a lost or stolen card immediately**: If your debit card goes missing, contact your financial institution right away, as you won't be responsible for purchases made with your card after you report it lost or stolen. It's a good idea to follow up with the bank in writing and to pay close attention to your account activity while you wait for a new debit card to arrive.  
    

## The Bottom Line

Debit cards are one of the easiest ways to make purchases and access funds from your checking account. Whether you're shopping online, taking out cash from an ATM, or purchasing something from a local store, you can likely use your debit card. They're a great option for people who are trying to stay on budget and don't want to be charged interest for carrying a balance on a credit card.

> **Article Sources**
>
> 1.  Federal Trade Commission. "[Using Debit Cards](https://consumer.gov/managing-your-money/using-debit-cards)."
>     
> 2.  Wells Fargo. "[Debit Card Questions](https://www.wellsfargo.com/help/checking-savings/debit-card-faqs/)," Click on "What Are the Daily Purchase and ATM Cash Withdrawal Limits for My Card?"
>     
> 3.  FDIC. "[Overdraft and Account Fees](https://www.fdic.gov/resources/consumers/consumer-news/2021-12.html)."
>     
> 4.  Wells Fargo. "[Selected Terms and Conditions for Wells Fargo Debit and ATM Cards](https://www08.wellsfargomedia.com/assets/pdf/personal/debit-card/terms-and-conditions.pdf)."
>     
> 5.  Experian. "[What Is a Foreign Transaction Fee?](https://www.experian.com/blogs/ask-experian/what-is-a-foreign-transaction-fee/)"
>     
> 6.  Consumer Financial Protection Bureau. "[What Types of Fees Do Prepaid Cards Typically Charge?](https://www.consumerfinance.gov/ask-cfpb/what-types-of-fees-do-prepaid-cards-typically-charge-en-2053/)"
>     
> 7.  Federal Trade Commission. "[Lost or Stolen Credit, ATM, and Debit Cards](https://consumer.ftc.gov/articles/lost-or-stolen-credit-atm-and-debit-cards)."
>     
> 8.  Webster First Credit Union. "[Debit Cards and ATM Cards: What Are the Differences and Benefits](https://www.websterfirst.com/blog/debit-cards-and-atm-cards-what-are-the-differences-and-benefits/)."