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 drugstore or grab some sushi for dinner.
Debit cards can also facilitate your financial life in other ways. They offer many benefits, 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, expiration date, and CVV or a similar code. In addition, they often use the same payment networks as credit cards, like 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, like a health savings account (HSA).
How Does a Debit Card Work?
You can use your debit card to make purchases in-store, online, or use it 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 on your card that is linked to your checking account or another cash account. 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 might have to sign for purchases more often when using a debit card. Likewise, you might be required to enter a PIN, while credit card purchases don’t usually require that.
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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 pay with your debit card at an array of businesses in the United States, 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. Those include withdrawing and depositing cash at an ATM, depositing a check, viewing your balance, and transferring money. Usually, you must enter your personal identification number (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 are the debit card vs. prepaid card differences in chart form:
|Linked to checking account?
|No. It’s linked to an account’s cash balance
|Not in many cases, though some checking accounts may have monthly fees
|Yes. Many prepaid cards have monthly, transaction, and other fees
Benefits of Using a Debit Card
Debit cards have a number of benefits that may make them a valuable part of your money management. 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.
Open a Debit Card With SoFi Banking
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. You’ll receive up to 15% cash back when you use a debit card linked to a SoFi Checking and Savings account at select local merchants, and you’ll have access to the global Allpoint Network of no-fee ATMs. In addition, you’ll enjoy spending and saving in one convenient place, earning a competitive annual percentage yield (APY), and paying no account fees. All this may help your funds grow faster.
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 and credit cards have their advantages, and one is not necessarily better than the other. Debit cards have benefits like a lack of interest charges, helping to limit overspending, and the ability 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 to recover from fraud than credit cards, mainly because debit cards are tied directly to the cash balance in your checking account. Because credit cards don’t draw money directly, it’s easy to reverse a fraudulent transaction. Debit cards also lack the rewards and benefits that certain credit cards offer, and they don’t contribute towards 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, like independently owned restaurants or rental car agencies, may not let you use your debit card.
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SoFi members with direct deposit activity can earn 4.60% annual percentage yield (APY) on savings balances (including Vaults) and 0.50% APY on checking balances. Direct Deposit means a deposit to an account holder’s SoFi Checking or Savings account, including payroll, pension, or government payments (e.g., Social Security), made by the account holder’s employer, payroll or benefits provider or government agency (“Direct Deposit”) via the Automated Clearing House (“ACH”) Network during a 30-day Evaluation Period (as defined below). Deposits that are not from an employer or government agency, including but not limited to check deposits, peer-to-peer transfers (e.g., transfers from PayPal, Venmo, etc.), merchant transactions (e.g., transactions from PayPal, Stripe, Square, etc.), and bank ACH funds transfers and wire transfers from external accounts, do not constitute Direct Deposit activity. There is no minimum Direct Deposit amount required to qualify for the stated interest rate.
SoFi members with Qualifying Deposits can earn 4.60% APY on savings balances (including Vaults) and 0.50% APY on checking balances. Qualifying Deposits means one or more deposits that, in the aggregate, are equal to or greater than $5,000 to an account holder’s SoFi Checking and Savings account (“Qualifying Deposits”) during a 30-day Evaluation Period (as defined below). Qualifying Deposits only include those deposits from the following eligible sources: (i) ACH transfers, (ii) inbound wire transfers, (iii) peer-to-peer transfers (i.e., external transfers from PayPal, Venmo, etc. and internal peer-to-peer transfers from a SoFi account belonging to another account holder), (iv) check deposits, (v) instant funding to your SoFi Bank Debit Card, (vi) push payments to your SoFi Bank Debit Card, and (vii) cash deposits. Qualifying Deposits do not include: (i) transfers between an account holder’s Checking account, Savings account, and/or Vaults; (ii) interest payments; (iii) bonuses issued by SoFi Bank or its affiliates; or (iv) credits, reversals, and refunds from SoFi Bank, N.A. (“SoFi Bank”) or from a merchant.
SoFi Bank shall, in its sole discretion, assess each account holder’s Direct Deposit activity and Qualifying Deposits throughout each 30-Day Evaluation Period to determine the applicability of rates and may request additional documentation for verification of eligibility. The 30-Day Evaluation Period refers to the “Start Date” and “End Date” set forth on the APY Details page of your account, which comprises a period of 30 calendar days (the “30-Day Evaluation Period”). You can access the APY Details page at any time by logging into your SoFi account on the SoFi mobile app or SoFi website and selecting either (i) Banking > Savings > Current APY or (ii) Banking > Checking > Current APY. Upon receiving a Direct Deposit or $5,000 in Qualifying Deposits to your account, you will begin earning 4.60% APY on savings balances (including Vaults) and 0.50% on checking balances on or before the following calendar day. You will continue to earn these APYs for (i) the remainder of the current 30-Day Evaluation Period and through the end of the subsequent 30-Day Evaluation Period and (ii) any following 30-day Evaluation Periods during which SoFi Bank determines you to have Direct Deposit activity or $5,000 in Qualifying Deposits without interruption.
SoFi Bank reserves the right to grant a grace period to account holders following a change in Direct Deposit activity or Qualifying Deposits activity before adjusting rates. If SoFi Bank grants you a grace period, the dates for such grace period will be reflected on the APY Details page of your account. If SoFi Bank determines that you did not have Direct Deposit activity or $5,000 in Qualifying Deposits during the current 30-day Evaluation Period and, if applicable, the grace period, then you will begin earning the rates earned by account holders without either Direct Deposit or Qualifying Deposits until you have Direct Deposit activity or $5,000 in Qualifying Deposits in a subsequent 30-Day Evaluation Period. For the avoidance of doubt, an account holder with both Direct Deposit activity and Qualifying Deposits will earn the rates earned by account holders with Direct Deposit.
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