Our pick for a debit card: HSBC Premier Checking
Deposit to Open
- Up to $700 in cash back
- Earn 3% cash back on qualifying direct deposits
- Emergency cash at branches across the globe
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Debit cards are a secure and convenient way of accessing your everyday spending without carrying cash. Like a credit card, you can use it to make direct purchases over the counter, online and over the phone. Unlike a credit card, the funds are drawn directly from your linked checking account, so you’re not obligated to make interest payments on your purchases.
Most debit cards come with a checking account, so to get a debit card that works best for you, compare the features of the corresponding checking account.
While most debit cards do the same thing, features may vary based on the bank or credit union and the type of account it’s linked to. How you plan on using the card will determine which features are most important:
Some debit cards offer cash back on Visa payWave or Mastercard PayPass purchases under $100. You normally need to make a minimum deposit, usually $1,000 or $2,000, into your transaction account every month to get the cash back reward on eligible purchases. In the case of joint accounts, either account holder can make the deposit requirements for the cash back to apply.
Debit cards are linked to a bank account and allow you to shop in stores or online, withdrawing purchases from your own balance of funds.
To use a debit card, you need a linked account to draw money from and a PIN.
In some cases, the cashier or card reader may ask if you want to use your card as a debit or credit card. If you use it as a credit card, you may need to provide a signature to verify your identity.
Whichever option you choose, you need enough money in your account before you can use your card. (A debit card doesn’t give you a line of credit, even if you use it as a credit card.) For the most part, there’s not much of a difference between using your card as a debit or credit card.
When you buy something in-person, you have the option to run your card as credit or debit. If you run it as debit, you’ll enter your PIN and the money will be taken out of your account immediately. You’ll also have the option to get cash back if the merchant allows it.
If you use it as credit, you’ll sign for the purchase. The payment is then processed through the credit card network and withdrawn from your account within a couple of days. Running your card as credit usually gives you the same anti-fraud protection that comes with credit cards, but check with your bank to be sure.
A debit card works similarly to a credit card, except that you’re using your own money instead of the bank’s money, which means you don’t need to worry about interest charges. With a debit card, you’re using your money in real time.
It is also a good strategy to prevent you from racking up debt, as a debit card only allows you to spend the money you have in the account at the time of purchase. A credit card, in comparison, will allow you to make purchases up to your credit limit and then send you a bill at the end of the month for you to pay back.
Also, getting a debit card is easier than getting a credit card because you don’t have to meet minimum income or age requirements.
A debit card is tied to your checking account whereas an ATM card is tied to your savings account. Both let you withdraw money at an ATM, but a debit card takes it a step further by allowing you to pay for purchases online and at point of sale locations. You can’t use an ATM card for anything besides ATM withdrawals.
Debit cards and prepaid cards serve the same purpose — they allow you to pay for purchases and withdraw money at ATMs. The difference is, a prepaid card isn’t linked to a bank account. Instead, you preload money directly onto the card and use it to cover purchases.
Prepaid cards prevent you from overspending because purchases that would bring your card balance below $0 are automatically declined. It’s easier to overspend with a debit card because many banks and credit unions offer overdraft protection to cover the overdrawn amount.
If you have a Chexsystems record and are having a hard time getting approved for a checking account, a prepaid card may be a better option. Most prepaid card companies don’t run credit checks and you can even have your paycheck direct deposited onto the card.
Because your debit card is linked to another account (often a checking account), it’s a safer alternative to checks or cash that are easy to misplace or lose. Debit cards issued by major credit card providers — like Visa or Mastercard — can be used everywhere credit cards are accepted, including online.
Use your debit card to withdraw cash from your account at participating ATMs:
With your debit card, you can also deposit checks, review your account balance or transfer money from linked accounts.Back to top
To get a debit card, open a checking account at a bank of your choice. Some banks will automatically send you a debit card; with others, you’ll have to request your card.
Once you receive your debit card, follow the included instructions to activate your card. Your bank will provide you with a pre-selected PIN and instructions on how to change it.
You can link almost any everyday transaction account to a debit card. You need an account and routing number and the account must be in the same name as what’s on the card. It can also be a joint account if desired.
The Card Verification Value (CVV) is a three digit number found on the back of your debit card. On American Express debit cards, the CVV is four digits. This number is used to verify your debit card and helps to reduce fraud, by proving to the merchant that you have the physical debit card with you when making a purchase online or over the phone.Back to top
One way for debit card companies to make money is to charge fees. Keep an eye out for the following:
A surcharge is an additional amount a business charges when you pay for a purchase using your debit card rather than another payment method — for example, cash. When you buy goods or services using a debit, credit or prepaid card, the merchant typically incurs its own processing costs on your payment. Many merchants consider these fees the cost of doing business, while others pass along the fee to the customer by imposing a surcharge on card-based transactions.
No. Surcharges and minimum purchase requirements are legal for credit cards only. And even then, only under specific conditions. This restriction applies even if you use a debit card after selecting “credit” on a point-of-service terminal.
Businesses are unable to get around the law by giving surcharges a different name, like handling or service fees. Report merchants charging you a surcharge on a debit card purchase to the card-processing networks.
Debit card fees are inconvenient, but it’s possible to avoid them by following these tips.
Fee schedules, amounts and charges vary by bank and account. Compare multiple options to find an account with reasonable or no fees.
Switch to e-statements to reduce fees, help the environment — and avoid paper statement fees.
There’s a good chance you’ll be charged for using an out-of-network ATM, so try to stick with your bank’s ATMs. Or find an account that doesn’t charge out-of-network ATM fees.
If possible, leave your card at home when traveling abroad. Instead, take out cash before you leave for a trip, use a prepaid travel card or sign up for a credit card that rewards you for worldwide travel.
Many banks waive monthly and other fees if you meet certain conditions, like maintain a minimum account balance. Narrow down an account by searching for conditions you can meet.
Fees for overdrafts and nonsufficient funds can be expensive. Keep an eye on your balance to avoid transactions that will take it below zero.
Surcharges on debit cards are illegal. Don’t be afraid to tell the retailer that it’s not allowed and you’ll take your business elsewhere.
If you wait to report a lost or stolen debit card, you increase your chances of fraudulent activity, and you could be held liable for some charges because you waited to make a report.
Debit card fraud happens when someone illegally obtains your card information and uses it to make purchases. You usually don’t know it’s happened until you see unusual activity on your bank statement. It’s important to notify your bank as soon as you see fraudulent charges, so they can deactivate your card and send you a new one.
This depends on your bank and the situation. Many of the bigger banks offer a 100% money-back guarantee on fraudulent transactions if you comply with the card’s conditions of use. For more information, speak to your financial institution.Back to top
Debit cards are a convenient way to make purchases and manage your cash. But depending on your bank, you could end up paying a fee to use yours. Keep an eye on your balance and understand the terms and conditions for your card to avoid paying more than necessary. To find a card with lower fees or better convenience, compare your debit card options against your needs and lifestyle.
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