What Is a Debit Card?

A debit card is a payment card that deducts money directly from a consumer’s checking account to pay for a purchase. Debit cards eliminate the need to carry cash or physical checks to make purchases directly from your savings. In addition, debit cards, also called “check cards,” offer the convenience of credit cards and many of the same consumer protections when issued by major payment processors such as Visa or Mastercard.

Unlike credit cards, debit cards do not allow the user to go into debt, except perhaps for small negative balances that might be incurred if the account holder has signed up for overdraft protection. Debit cards usually have daily purchase limits, meaning it may not be possible to make an especially large purchase with a debit card.

Key Takeaways

  • Debit cards eliminate the need to carry cash or physical checks to make purchases, and they can also be used at ATMs to withdraw cash.
  • Debit cards usually have daily purchase limits, meaning it may not be possible to make an especially large purchase with a debit card.
  • Debit card purchases can usually be made with or without a personal identification number (PIN).
  • Some debit cards offer reward programs, similar to credit card reward programs, such as 1% back on all purchases.
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How Debit Cards Work

How a Debit Card Works

Debit cards serve a dual purpose: They allow the user to withdraw money from his or her checking account through either an ATM or the cash-back function many merchants offer at the point of sale. In addition, they also allow the user to make purchases.

ATM cards, by contrast, only allow the user to withdraw money from an ATM. And credit cards only allow purchases—not cash withdrawals—unless the credit card holder has a personal identification number (PIN)–enabled cash advance feature. However, the cash advance taken from a credit card will incur interest, unlike withdrawing cash from a checking account with a debit card.

Debit cards don't always allow you to escape fees completely: If you withdraw cash from an ATM that is not affiliated with the bank that issued your debit card, you may be charged a fee.

Debit card purchases can usually be made with or without a PIN. If the card has a major payment processor’s logo, it can be run as a credit card, and the cardholder won’t need to take the risk of exposing his or her PIN. The money will still come directly out of the cardholder’s checking account, and there won’t be any finance charges when the debit card is run as a credit card. Some debit cards offer reward programs, similar to credit card reward programs, such as 1% back on all purchases.

Debit card purchases are easy to monitor, and there’s no way to lose track of spending, as—unlike with using a credit card—the money comes directly out of a checking account. 

Every transaction made with a debit or check card will appear on the account holder’s monthly statement, making it easy to keep track of purchases. Consumers are effectively making their purchases in cash—that is, with money they actually have, as opposed to money borrowed on credit.

However, unlike with cash purchases, there’s no way to lose track of amounts spent on a debit card. And while lost or stolen cash is gone forever, a lost or stolen debit card can be reported to the bank, which can deactivate the card, remove any fraudulent transactions from the cardholder’s account, and issue a new card.

Note that debit cards generally don't have as many protections against fraud as credit cards. For one thing, if an identity thief gets into your actual bank account, you lose the money immediately. But they are considerably safer than cash and do have protections if you inform the issuer promptly if one is lost or stolen.