The Complete Guide to Using Your Debit Card

A debit card is a payment card that is linked to your bank account. These cards can help you make purchases either online or in store, as well as withdraw cash at an ATM. A debit card can allow you to breeze through your day, paying to pick up a few things at the store, then later grabbing some takeout for dinner.

Debit cards can also facilitate your financial life in other ways. But if you are new to using one, you may have questions. That’s where this guide comes in. Read on to learn:

•   What is a debit card?

•   How do you use a debit card?

•   When and where can you use a debit card?

•   What are the pluses of using a debit card?

What Is a Debit Card?

A debit card is a payment card that is typically linked to a bank account. These cards can be used in place of cash when making purchases.

Debit cards have many of the same characteristics as credit cards, such as a 16-digit card number, an expiration date, and a CVV or a similar code. In addition, they often use the same payment networks as credit cards, such as Visa or Mastercard.

Usually, you will receive a debit card when you open a checking account at a bank. However, debit cards can be linked to other types of accounts in some cases, such as a health savings account (HSA).

How Does a Debit Card Work?

You can use your debit card to make purchases in store or online or to withdraw cash. When you use it in a store, you can swipe, insert, or tap (provided the card supports contactless payments).

What distinguishes a debit card from other kinds of plastic is where the money comes from. While a credit card works like a loan you pay off over time, a debit card typically draws directly from your checking account. Hence, a debit card will be allied with the bank that holds your cash balance. Contrast that with credit cards, which you can open with any of a number of banks, even if you haven’t deposited cash there.

How to Use a Debit Card

Learning how to use a debit card is usually a simple process. In general, it’s a matter of transmitting your card’s information to a merchant or service provider. You can do this by swiping, inserting, or tapping your card. When making purchases online, you must provide basic information printed on your card. Typically, that means sharing the card’s number and three-digit code, along with other personal information.

In most cases, using a debit card is much the same as using a credit card. However, you often need to type in a personal identification number (PIN), while credit card purchases don’t usually require that.

Ways That You Can Use a Debit Card

There’s no shortage of ways to use a debit card. You can use your debit card to make everything from in-store purchases to ATM withdrawals. As long as you have cash available, debit cards are a convenient way to pay.

•   In-store purchases: You can typically pay with your debit card at an array of businesses in the United States, ranging from the dry cleaner to your local yoga studio. Many debit cards have a Visa or Mastercard logo on them, which doesn’t mean they are credit cards but does indicate that they are likely accepted wherever those cards can be used.

To pay, either swipe the card, insert it into a terminal, or simply tap your card near the sensor. You may or may not have to sign for the purchase. Also, you may be able to access features you don’t usually see with a credit card, like the ability to request cash back.

•   Online purchases: You can use your debit card for online purchases much the same way you would a credit card. Ordering flowers to send your mom on Mother’s Day? Or perhaps snapping up some new shoes on sale? Your debit card may well be accepted.

At checkout, you’ll have to enter information like the name on the card, the card number, and the card’s expiration date.

•   At an ATM: You can perform several tasks at an ATM using a debit card. These may include: withdrawing money, depositing cash at an ATM, depositing a check, viewing your balance, and transferring money. Usually, you must enter your PIN to complete a transaction.

Recommended: What Is a Cardless Withdrawal?

Debit Card vs Prepaid Card: What’s the Difference?

Debit cards and prepaid cards have many similarities, but they are not the same. The main difference is that debit cards are linked to a checking account, while prepaid cards must be loaded with money before you can use them.

There are pros and cons to prepaid debit cards. For instance, the fact that they aren’t linked to a checking account makes them a great gift. However, they can also come with high fees.

Here’s a side-by-side comparison of debit cards vs. prepaid cards.

Recommended: Breaking Down the Different Types of Debit Cards

Benefits of Using a Debit Card

Debit cards have a number of benefits that may make them a valuable part of your money management plan. Some of their benefits include:

•   Convenience: Most stores in the United States will let you pay with a debit card, making them an easy way to pay. Plus, you can use them in place of cash, so you don’t have to fumble through your wallet or purse for dollars and cents.

•   Cash back: Some stores let you request cash back when making a purchase with a debit card, saving you a trip to the ATM.

•   No interest charges: When you first get a credit card, you may realize that they are like a loan and so you will be charged interest on the money borrowed. Debit cards, however, don’t involve any such fees.

•   Limits overspending: When you compare debit cards vs. credit cards, you may realize that credit cards can lead to ringing up significant debt. With a debit card, you are drawing from your own cash balance, so you can only spend the cash you have on hand.

The Takeaway

Debit cards are typically provided when you open a bank account. They let you conveniently shop online or in store. You can also use them to make deposits and withdrawals at an ATM. Debit cards are often branded as Visa or Mastercard, allowing you to use them at a broad array of merchants and service providers.

Getting a debit card can be an important factor when picking a bank. If you’re opening an online bank account, see what SoFi offers.

Interested in opening an online bank account? When you sign up for a SoFi Checking and Savings account with eligible direct deposit, you’ll get a competitive annual percentage yield (APY), pay zero account fees, and enjoy an array of rewards, such as access to the Allpoint Network of 55,000+ fee-free ATMs globally. Qualifying accounts can even access their paycheck up to two days early.

FAQ

What happens if my debit card is declined?

This depends on the reason it was declined. For instance, it could be that your bank suspects unusual activity or that you have an insufficient balance. Depending on the reason, you may have a hold placed on your card, overdraft protection might kick in, or your recurring payments might fail. Contact your bank to learn more.

Are debit cards better than credit cards?

Both debit cards and credit cards have their advantages, and one is not necessarily better than the other. Debit cards have benefits such as not incurring interest charges, limiting the tendency to overspend, and allowing you to request cash back at some stores.

What are the drawbacks of a debit card?

Perhaps the biggest drawback of a debit card is that it can make it more difficult for you to recover from fraud than credit cards, mainly because debit cards are tied directly to the cash balance in your checking account. As credit cards don’t draw money directly, a fraudulent transaction may be reversed. Debit cards also lack the rewards and benefits that certain credit cards offer, and they don’t contribute toward your credit score either.

Where can I not use a debit card?

Many debit cards can be used anywhere that accepts Visa or Mastercard. That means you can use them at most stores. Some establishments, such as independently owned restaurants or rental car agencies, may not let you use your debit card.

Photo credit: iStock/chabybucko

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