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A debit card is a payment card that’s typically linked to your checking account and can be used to make purchases.
When you apply for a checking account, most banks and credit unions will issue you a debit card — if you’re approved — that can be used to buy products or services in stores and online. When you use your card to buy something, money is deducted from your account to pay for it.
In this article, we’ll review some things to know about debit cards.
- Benefits of using a debit card
- Debit card security: What if your card is lost or stolen?
- Debit card fees
- Debit cards vs. other payment options
If you’re considering making a debit card your go-to payment method, here are a few reasons you might want to use one.
- A debit card can make it easy to track your spending because the card’s transactions are included on your bank statement. If you have online banking, it’s even easier to check your account balance to track your budget.
- A debit card can be a convenient alternative to cash for some. There’s no need to go out of your way to swing by the ATM because your debit card can be used to make purchases just about anywhere.
- Since you’re limited to the cash you have in your account — unless you opt into a feature like overdraft protection — a debit card can help you avoid overspending and racking up unnecessary debt — unlike a credit card.
- Because you’re not borrowing money to pay for purchases, you won’t be charged interest on purchases you made with your debit card.
If you have a debit card that’s linked to your checking account, an unauthorized user could gain access to your account — and the money in it — if it falls into the wrong hands. Fortunately, the Electronic Fund Transfer Act provides protections for consumers that can help limit your liability for fraudulent charges — but you’d have to act fast in reporting your card as lost or stolen.
If you report your debit card missing before any unauthorized charges are made, you’re not responsible for unauthorized transactions. If you report it lost or stolen within two business days of learning about the loss or theft, your maximum financial loss is the lesser of $50 or the total amount of unauthorized transfers. If you wait even longer, you could be on the hook for $500 or more.
If you still have your card in your possession when someone uses it without permission, you aren’t liable for any unauthorized transactions — as long as you report the fraudulent activity within 60 calendar days of your statement being sent to you.
To help keep your account safe, consider setting up alerts to notify you when fraud is suspected if this is something that’s offered by your bank or credit union. And be sure to regularly review your account statements carefully for purchases you didn’t make so you can report problems right away.
While you won’t be charged interest on transactions made using your debit card, you may be on the hook for other fees.
- Monthly maintenance fees — In general, debit cards are issued when you’re approved for a checking account. Some banks and credit unions charge monthly fees to maintain those accounts.
- Out-of-network ATM fees — Debit cards can be used to withdraw cash from ATMs. If you use your card to get cash from an ATM that’s not in your bank’s network, you may be charged a fee.
- Overdraft fees — If you opt into overdraft protection, your bank or credit union may charge you an overdraft fee to cover the cost of a purchase or ATM withdrawal if there’s not enough money in your account. You can avoid this type of fee by either opting out of overdraft protection or linking your savings account to your checking account, so your financial institution can transfer money between them. You might be charged a transfer fee, but they’re typically much lower than overdraft fees.
- Transaction fees — Some financial institutions charge a fee if you use a personal identification number, or PIN, instead of your signature at the point of sale.
There are many ways to pay for the things you buy. Here’s how debit cards compare with other payment options.
- ATM card — This type of card can be used at ATMs to withdraw money from or deposit money into your bank account.
- Credit card — This type of card offers a line of credit that allows you to borrow money, up to a credit limit, to make purchases, transfer balances or get cash advances. When you use a credit card, you agree to repay the amount you borrow in the future. Unlike debit cards though, credit cards can help you establish and build your credit history. Credit cards can come with other advantages, like cash back or travel perks, but keep in mind that you’ll be charged interest with a credit card unless you pay your monthly balance on time and in full.
- EBT card — These cards are how eligible people can use the Supplemental Nutrition Assistance Program — which is a federal nutrition program — to buy food.
- Prepaid card — Unlike a traditional debit card, prepaid cards aren’t linked to your checking account. Instead, you load money onto them and use them to make purchases until the balance is zero.
Debit cards can be a convenient alternative to using cash for everyday purchases. Because you’re limited to using the money you have in your bank account, debit cards can help you keep your spending in check.
But if your debit card falls into the wrong hands, thieves could gain access to the money in your bank account, leaving you on the hook for purchases you didn’t make. If you’re going to use a debit card, it’s important to monitor your account activity, so you can identify and report unauthorized purchases right away.