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What Is a Debit Card and How Does It Work?

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Debit and credit cards both have their uses, but a debit card might be better for people with certain financial habits. Keep reading to find out what a debit card is and whether it can help you manage your money.

What Is a Debit Card?

A debit card is a payment card that lets you pay for purchases or withdraw money directly from your checking account. Also referred to as an ATM or bank card, a debit card offers the convenience of cashless transactions without incurring debt you’d have to repay with interest.

How To Get a Debit Card

The good news is that getting a debit card is easy. When you open a checking account at a financial institution, you usually will receive a free debit card as part of the process. If not, you can request one.

Good To Know

When you’re considering opening a checking account and getting a debit card, look for a bank that offers a free checking account — or one that makes it easy to avoid fees. Compare each bank’s monthly fees for opening and using a checking account. Some banks have daily account balance minimums to avoid fees, while others do not. Careful planning can help you save money.

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Where To Use Debit Cards

Debit cards are valid for in-store or online purchases wherever the payment processing network indicated by the card’s logo — Visa or Mastercard, for example — is accepted. You can also use a debit card to withdraw money from your bank account, whether via an ATM or by requesting cash back at the register when you pay with the card in a PIN transaction.

Advantages and Disadvantages of Debit Cards

Debit cards have several advantages, but they’re not the best choice for every situation.

Advantages of Debit Cards

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Disadvantages of Debit Cards

Debit Card Fees

Although debit cards don’t accrue monthly interest charges, your bank might charge other fees, such as:

What Is the Difference Between a Debit Card and a Credit Card, ATM Card and Prepaid Card?

To give you a better understanding of how a debit card functions, here’s how it compares with other types of cards.

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Debit Cards vs. Credit Cards

Debit cards and credit cards differ in several ways:

Debit Cards vs. ATM Cards

Although the terms are sometimes used interchangeably, debit cards and ATM cards aren’t necessarily the same thing:

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Debit Cards vs. Prepaid Debit Cards

Traditional debit cards are also like prepaid debit cards because in both cases, funding is dependent on your actual money, not borrowed funds. Here are the biggest differences:

Are Debit Cards Safe?

The general fear about debit cards is the risk of becoming a victim of fraud because the card is directly attached to your bank account. But banks have anti-fraud measures in place to keep your card and your account secure.

The cards currently being issued by banks have an embedded chip that drastically reduces the risk of fraud. You’ll know your merchants’ card readers are chip-enabled if they require you to insert your card rather than swipe it. PINs and security codes also help to secure your account.

Some banks have a 0% liability policy in the event that your card is lost or stolen. Even if your bank doesn’t, the law limits your liability to the following amounts:

Can a Debit Card Help You Manage Your Money?

A debit card can help you manage your finances as long as you track your account balance and remember that you’re essentially spending cash directly from your account. The interest charges you save by spending carefully and choosing debit over credit might even free up money you can use to build savings.

Jared Nigro contributed to the reporting for this article.