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How debit cards work

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Make purchases without carrying cash with your debit card

Debit cards are a secure and convenient way of accessing your everyday spending without carrying cash. Like a credit card, it can be used 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 are not obligated to make interest payments on your purchases.

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How does a debit card work?

Debit cards are linked to your checking account. When you swipe the card or enter the number, that information is sent electronically to a card processing network. They ensure the transaction data received is correct, before performing a fraud analysis and sending the information to the issuing bank. Once they have confirmed that the card is valid and you have the money to cover the purchase, the transaction is approved. This is a lot of information being passed around, yet with the help of technology it happens in seconds.

Since a debit card is linked to a checking account, it’s a great alternative to using checks or carrying cash. Debit cards with a major credit card processing logo can be used in all the same places as credit cards, including online. The funds for a debit card transaction still come from the linked checking account, even when the card is used like a credit card.

Not only can you use a debit card to make purchases, you can also use it to withdraw cash from your account by using your card at an ATM. You simply insert your card into the machine, enter your PIN, and follow the onscreen prompts for making a cash withdrawal. You can also use the debit card at an ATM to deposit checks, check your account balance or transfer money from linked accounts.

Getting a debit card doesn’t require a credit check, which makes it more accessible than a credit card. You do need to have a checking account to be able to use a debit card. Most banks will automatically issue you a debit card when you open a checking account. If you don’t already have a debit card linked to your checking account, you can simply ask your bank for one.

What is a checking account?

A checking account is a type of bank account. Once you deposit money into it, you can spend the funds by writing checks or using an ATM or debit card.

How do I use a debit card?

To use a debit card, you need a checking account and a PIN.

  • Your debit card is linked to your checking account — that’s where the money comes from. When you swipe your card or insert it into a chip reader, money is deducted from your checking account.
  • To make debit transactions, you’ll need a PIN — or your personal identification number. This is a four-digit number you enter into a card reader to verify your identity.

How a debit card transaction works

It’s easy to use a debit card:

  1. Before you use your card, confirm that you have enough funds in your checking account.
  2. To make a purchase, swipe your card through the card reader. Your debit card may have a chip, in which case you’ll insert your card into the reader.
  3. Enter your four-digit PIN on the keypad.
  4. Follow any other prompts on the card reader to complete the transaction.

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’ll 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.

How is a debit card different to a credit card?

A debit card works similarly to a credit card, except that you’re using your own money instead of the banks’ money, which means you don’t need to worry about interest payments. 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 and send you a bill at the end of the month for you to pay back.
Should I press the credit or debit button?

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How do I compare check cards?

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:

  • Credit card logo. Debit cards that are imprinted with a credit card logo such as Visa, American Express, Discover or Mastercard give you more flexibility in your spending options. The money is still being withdrawn directly from your banking account, but you have the ability to purchase or withdraw money wherever that credit card is accepted.
  • Linked account. Most debit cards are linked to your checking account. Some can be linked to both your checking and savings, but they might come with extra fees and limitations.
  • ATM accessibility. Debit cards are also used to draw money directly out of your account through an ATM. Factor in the proximity and availability of ATMs before you choose a bank or debit card. Some allow you to have access to a large number of ATMs for free. Bankwest and Commonwealth Bank’s ATM network is currently the largest in the US.
  • Transaction fees. Your bank or credit union may charge fees for transactions such as point of sales purchases, cash back, foreign currency conversion, ATM withdrawals within and outside of the bank’s network, as well as fees for using the the card overseas.
  • Security features. Debit cards provide direct access to your banking account, and need to be secure in order to avoid fraud and mishandling. Check the type of security features being offered by the bank for the debit card to ensure that your account is secure.
  • Overseas use. Not all debit cards are formatted to be used overseas. Make sure that this is one of the features, and look carefully at the fees and charges made to your account if and when you make overseas transactions.
  • Rewards. Some financial institutions offer rewards like cash back and discounts from your favorite stores.
  • Debit cards for students. As a student, you can receive a range of benefits from your debit card, including no monthly fee.

What is a cash back debit card?

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.

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How do I get a debit card?

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.

What bank accounts can I link to my debit card?

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.

What is the CVV number on my debit card?

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.

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Compare checking accounts that come with debit cards

Name Product APY ATMs Fee
Capital One 360 Checking
Capital One 360 Checking
39000+ ATMs Nationwide
A fee-free online checking account you can use anytime, anywhere.
Discover Cashback Checking
Discover Cashback Checking
Over 60,000 no-fee ATMs
(can be waived)
Earn 1% cash back on up to $3,000 in qualifying debit card purchases each month
Capital One MONEY
Capital One MONEY
39,000+ ATMs Nationwide
A teen checking account with zero fees. Seriously.
Discover Cashback Debit
Discover Cashback Debit
Over 60,000 no-fee ATMs across the U.S.
Earn 1% cash back on up to $3,000 in debit card purchases each month.
Surcharge-free Umpqua ATMs in all of the network's 5 states, plus up to $10 per month in ATM fee rebates
Simple and straightforward, a checking account for anyone looking for no-frills banking.
1,000 fee-free ATMs across the country
Pay a $0 monthly service charge and get free access to BBVA Compass ATMs.
Free to use anywhere worldwide
Up to 1.00% APY. No monthly service fees. Free access to every ATM in the world. FDIC insured.
NBKC Personal Account
NBKC Personal Account
Use any of the 32,000+ MoneyPass ATMs in the US for free
Ain’t nobody got time for gotchas. Open accounts in less than 5 minutes.
38,000 fee-free ATMs nationwide
No overdraft fees. No monthly maintenance fees. No monthly service fees. No minimum balance fees. No deposit required. No foreign transaction fees. Over 38,000+ fee-free MoneyPass ATMs.
65,000 preferred ATMs nationwide (Allpoint, MoneyPass, PNC)
An online checking account means no driving around town, no waiting in line and no bankers' hours.
Surcharge-free Umpqua ATMs in all of the network's 5 states, plus 4 non-Umpqua ATM fee rebates per month
(can be waived)
A checking account that's tied to your savings and comes with lots of fee rebates.
Nationwide. Access to 16,000 ATMs and 5,100 branches.
(can be waived)
College Checking comes with no monthly service fee as long as you’re between 17-24 years and a student for up to 5 years.
CIBC iCan Checking
CIBC iCan Checking
(can be waived)
iCan checking is a non-interest bearing account offered by CIBC Bank USA that rewards you for trusting us to meet your everyday banking needs, because it’s based on your relationship with us. The more you use certain banking services, the more you can earn in cash back rewards and ATM fee reimbursements.
Nationwide. Access to 16,000 ATMs and 5,100 branches.
(can be waived)
Our most simple checking account is easy to use and gives you access to 16,000 ATMs and 5,100 branches.
CIBC myChoice Checking
CIBC myChoice Checking
(can be waived)
myChoice is an interest-bearing checking account offered by CIBC Bank USA that rewards you for trusting us to meet your everyday banking needs. It’s based on your relationship balances – the total amount you have in deposits or outstanding loan balances with us in qualifying related accounts.
Surcharge-free Umpqua ATMs in all of the network's 5 states, plus up to $25 per month in ATM-owner fee rebates
(can be waived)
Easy banking for complicated lives.
5,100 branches in 28 states.
(can be waived)
Premium banking and more, designed for your life.
Access to 16,000 ATMs and 5,100 branches.
(can be waived)
Earn interest with Chase Premier Plus CheckingSM.
Surcharge-free HSBC ATMs nationally and internationally, plus up to four rebates a month for using non-HSBC ATMs in all US states except New York
(can be waived)
Get a $350 Welcome Deposit for eligible new customers who open an HSBC Advance Checking account with qualifying activities
Surcharge-free HSBC ATM access nationally and internationally
(can be waived)
Get a $750 Welcome Deposit for eligible new customers who open an HSBC Premier Checking account with qualifying activities.

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What kind of fees are charged on my checking card?

One way for debit card companies to make money is to charge fees. Keep an eye out for the following:

  • ATM fees. You may have to pay a fee for ATM transactions. A cash withdrawal may be charged a $2 to $5 if you use an ATM outside your bank’s network. Your bank may charge a fee in addition to the fee you pay the ATM operator. Other ATM transactions like balance inquiry or account transfer can also incur fees.
  • Card replacement fee. Your bank may charge a fee to replace your debit card at your request. This fee doesn’t apply when the bank replaces an expired debit card. There may be an additional fee to have your replacement card rushed to you.
  • Foreign transaction fee. Purchases made in foreign currencies or with a foreign merchant are subject to a foreign transaction fee. You also have to pay the fee if you use your card at an ATM to withdraw funds in a foreign currency. Foreign transaction fees are a percentage of the transaction, usually around 3% of the value of the transaction.
  • Monthly account fee. Your checking account may include a monthly account maintenance fee. Check with your bank to see if you’re able to avoid this fee. Some banks allow you to avoid the monthly account maintenance fee if you use direct deposit, make a certain amount of transactions each month, or maintain a minimum average daily account balance.
  • Overdraft fee. If you make a debit card purchase that exceeds your account balance, your bank may process the transaction as a convenience to you. In exchange for this courtesy, you’ll be charged an overdraft fee. You can avoid overdraft fees by opting out of having overdraft transactions processed. If you choose to opt out, your bank will decline any purchases that exceed your account balance. You can also link your checking account to a savings account to use as overdraft protection.
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What are the pros and cons of debit cards?


  • More convenient than cash. Instead of carrying a lot of cash in your wallet, you can simply swipe your debit card.
  • More secure than cash. A would-be fraudster won’t be able to use your debit card unless they know your PIN.
  • Avoid spending money you don’t have. If you have trouble with overspending, a debit card could be a solid choice. You can only draw from money you’ve already deposited, unlike with a credit card (which gives you a line of credit).
  • Avoid cash advance fees. If you use a credit card to collect money from an ATM, you’ll likely pay hefty cash advance fees. You won’t pay these with a debit card (though you may still pay ATM fees).
  • It’s easy to get one. If you have poor credit, it can be difficult to get a credit card. It’s far easier to get a debit card — just open a checking account.
  • Low fees. Many credit cards have annual fees. Debit cards tend to have low fees or no fees at all.
  • Link to a savings account. Some debit cards can be linked to savings accounts, which can help you save for the long term.
  • Interest free. Make purchases online and over the phone without incurring any interest fees.


  • There is no opportunity to build your credit. Because debit card usage is not reported to the credit bureaus, responsibly handling your debit card will not help your credit score.
  • There is no grace period on purchases. Whenever you use your debit card for a purchase, the money comes out of your checking account almost immediately, reducing the amount of cash you have available for other purchases. Using a credit card gives you a small grace period to delay payment for purchases. If you’re willing to pay interest on the balance, you can revolve your balance from month to month as long as you make the minimum payment each month.
  • Debit cards have less fraud protection than credit cards. By law, you can be liable for up to $500 of fraudulent debit card transactions depending on when you report the fraud. (In some instances, you could be liable for all of the fraudulent transactions if you wait several months to report your lost or stolen card). With a credit card, your maximum liability is $50 depending on when you report the fraud.
  • Car rental is more difficult with a debit card. Depending on the car rental agency’s policies you may have to pay an additional deposit when you use a debit card to rent a car. This leaves part of your checking account balance unavailable until after you’ve returned the rental car and the transaction processes completely. In addition to the deposit, you may also have to provide additional documentation to prove your identity and the rental agency may require you to go through a credit check before renting you a vehicle.
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Important mistakes to avoid with debit cards

While debit cards are low-risk payment devices, there are a few critical mistakes you should avoid.

  • Not watching your account balance. Keeping track of your account balance helps you avoid overdrafts. When your account balance is already negative, each subsequent transaction will be charged an additional overdraft fee. Your bank likely has a smartphone app you can download to quickly and easily check your checking account balance.
  • Waiting to report a lost or stolen debit card. If your debit card is missing, report it to your bank right away rather than waiting to see if you find it. The longer you wait to report a lost or stolen debit card, the more likely it is that someone could use your debit card to make transactions on your account. Not only will you be without access to your funds, you may also be liable for some of the charges since you waited to report the missing card.
  • Frequently using out-of-network ATMs. Withdrawing cash from out of network ATMs is more expensive than using your bank’s ATM, since you’ll be charged an ATM fee by both parties. Doing this several times in a month will quickly add up. Use ATMs inside your bank’s network as much as possible to minimize the amount of ATM fees you pay.
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What is debit card fraud?

Debit card fraud is when someone else obtains your card details and makes transactions on your card without you knowing. If you report a fraudulent transaction on your card, your bank should deactivate your card to prevent the person from making anymore transactions.

You should always check your debit card statement to make sure all the transactions listed are legitimate. This will help you identify any unusual activity.

What should I do if I’ve noticed my Visa or Mastercard accounts are displayed incorrectly online?

First check your recent receipts and transactions made by any of your additional cardholders. If there is still a discrepancy, contact your bank immediately in case someone is using your account fraudulently.

Lost or stolen cards

If your card is lost or stolen, let your bank know right away, even if you’re overseas. In most cases, you can get a replacement card as soon as possible and your bank can stop all transactions on your account. You should report it within two days, so you won’t be liable to pay up to $500 of fraudulent debit card transactions. Your liability increases if you don’t report it within 48 hours.

Can I get a refund on fraudulent transactions?

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.

I’ve tried to withdraw cash from my account using an ATM but it’s miscalculated the money. What should I do?

If this occurs, try to contact your bank as soon as possible to notify them of the problem. They should be able to get in touch with the branch who takes care of the ATM and sort it out.

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