Debit Card Definition, Fees, and How They Work

Amy Fontinelle has more than 15 years of experience covering personal finance, corporate finance and investing.

Khadija Khartit is a strategy, investment, and funding expert, and an educator of fintech and strategic finance in top universities. She has been an investor, entrepreneur, and advisor for more than 25 years. She is a FINRA Series 7, 63, and 66 license holder.

Suzanne is a content marketer, writer, and fact-checker. She holds a Bachelor of Science in Finance degree from Bridgewater State University and helps develop content strategies for financial brands.

Types of Checking Accounts

1. What Is a Checking Account? Here's Everything You Need To Know
2. 6 Different Checking Accounts
3. Joint Checking Account

Checking Account Basics

1. Account Balance
2. Non-Sufficient Funds
3. Routing Transit Number
4. Overdraft Protection
5. Overdraft Protection: Pros and Cons
6. Overdraft Consequences

Opening a Checking Account

1. The Documents You Need
2. Pros and Cons of Checking Accounts
3. Checking Account Beneficiaries

Paying With Checks

1. What is a Check?
2. Bounced Check
3. Do Checks Expire?
4. How to Write a Check

Using a Debit Card

Best Checking Accounts

1. Best Checking Accounts for Teens
2. Best Rewards Checking Accounts
3. Best High-Interest Checking Accounts

What Is a Debit Card?

A debit card is a payment card that deducts money directly from your checking account. Also called “check cards” or "bank cards," debit cards can be used to buy goods or services or to get cash from an ATM. Debit cards can help you reduce the need to carry cash, although using these cards can sometimes entail fees.

Key Takeaways

• Debit cards are payment cards that reduce the need to carry cash or physical checks to make purchases.
• You can use debit cards at ATMs to withdraw cash.
• Debit card purchases may require a personal identification number (PIN), but some purchases can be made without one.
• You may be charged an ATM transaction fee if you use your debit card to withdraw cash from an ATM that's not affiliated with your bank.
• Some debit cards offer rewards, similar to credit card rewards, such as 1% back on purchases.

How a Debit Card Works

A debit card is a card linked to your checking account. It looks like a credit card, but it works differently. The amount of money you can spend on a debit card is determined by the amount of funds in your account, not by a credit limit such as credit cards carry. Your debit card may be connected electronically to your account, or it can be an offline card. Offline cards take longer to process transactions.

Unlike with a credit card, you don't go into debt when you use a debit card because you are using it to access funds you already have. You don't have to make monthly minimum payments on a debit card because there is no debt to repay.

You can use a debit card to get cash from an ATM, or you can make purchases with it like you make purchases with credit cards. With debit cards, you may need to enter your PIN (personal identification number), although many debit cards can be used to make purchases without a PIN.

Debit cards usually have daily purchase limits, meaning you can't spend more than a certain amount in one 24-hour period.

Debit cards draw the funds immediately from the affiliated account. So, your spending is limited to what’s available in your checking account, and the exact amount of money you have to spend will fluctuate along with your account balance.

Debit cards for kids and teens present a good opportunity to teach your child about money while giving them a convenient spending option.

Debit Card Fees

Generally, debit cards don't have annual membership fees or cash-advance charges, but there are other potential fees to consider.

ATM Transaction Fee

If you withdraw cash from an ATM that's not affiliated with the bank that issued your debit card, you may be charged an ATM transaction fee. These fees are also called "out-of-network" fees.

Insufficient Funds Fee

If you use the card to spend more than you have in your account, you can face an insufficient funds charge. These fees are also called non-sufficient funds (NSF) fees.

Overdraft Fee

If you've registered for overdraft protection and spend more than your limit, your purchase will go through, but you will incur overdraft fees.

Replacement Card Fee

You might incur a replacement card fee if your debit card is lost, damaged, or stolen and you need to order a new card.

Foreign Transaction Fee

If you use your debit card to make a purchase in a foreign currency, you could get charged a foreign transaction fee, such as 3% of the transaction amount.

Prepaid Debit Card Fees

A prepaid debit card, which has a set amount of money stored on it, may have similar fees. A prepaid debit card is like a gift card in that it allows you to spend a sum that's been loaded onto the card. Fees for prepaid debit cards can include monthly maintenance fees, transaction fees, ATM fees, reloading fees, balance inquiry fees, inactivity fees, paper statement fees, and foreign transaction fees.

Debit Card vs. Credit Card

Many bank debit cards are issued by credit card companies, so it may seem like there is little distinction between credit and debit cards. For example, a Mastercard debit card can look like a Mastercard credit card. However, they differ in many ways, from the way they finance a purchase to the amount of consumer protections they provide.

Here is a comparison of some of their main features in more detail.

Financing

Credit cards and debit cards work in fundamentally different ways in terms of how they use your money. Using a debit card to make a purchase is like writing a check or paying with cash. You're paying for the item with funds in your bank account, not with revolving credit.

When you use a credit card, you're essentially using a revolving loan. The credit card company pays the merchant, then bills you for the amount. You repay it when you get your monthly statement. If you don't repay the full amount, you pay interest on the remaining portion the following month.

Rewards

Some debit cards offer reward programs, similar to credit card rewards programs, such as 1% cash back on all purchases.

Rewards programs are more common with credit cards than with debit cards. Credit card issuers can offer better terms with an introductory offer, cashback rewards, travel points, and other perks.

Protections

By law, you can't be held responsible for more than $50 of fraudulent purchases made on a debit or credit card, as long as you report the fraud in a timely manner. However, credit card companies often extend their protections to provide zero liability to cardholders.

ATM Use

You can get cash with both debit and credit cards. But when you get cash using a credit card, you're borrowing money with a "cash advance." If you use your credit card for cash, you may pay interest on the funds starting right when you withdraw them. You may also pay a transaction fee and owe a higher interest rate than you would on purchases.

You don't carry a balance on a debit card because each time you use it, you're paying with money that already belongs to you. So there are no interest charges.

Pros and Cons of Debit Cards

• Safer than cash
• Doesn't incur debt
• Easier qualifications than credit cards

• Limits expenditures to cash in bank and/or a daily amount
• Could incur fees
• Fewer perks than credit cards
• Fewer protections than credit cards

Pros Explained

• Safer than cash: Debits are considerably safer than cash. Transactions made with a debit cards appear on the account holder’s monthly statement, making it easy to see where the money went. 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.
• Doesn't incur debt: With debit cards, you are effectively making purchases in cash—with money you already have, as opposed to money borrowed on credit. So, you won't go into debt using a debit card. (However, some overdraft protection plans allow you to spend past your limit, but you must repay the balance quickly and you will likely incur a fee.)
• Easier qualifications than credit cards: Debit cards are easier to get if you have poor credit. If you have a checking account, you can get a debit card. You don't have to apply and get approved for debit cards like you do with credit cards.
  

Cons Explained

• Limits expenditures to cash in bank and/or a daily amount: When you use a debit card, you can only spend up to the amount of money you already have. If you need to finance a purchase to pay it off over time, you can't use a debit card for that type of purchase.
• Could incur fees: Using a debit card can entail fees, including overdraft fees when you withdraw more than the amount you have in your account, and ATM fees when you use an ATM outside your bank's network.
• Fewer perks than credit cards: Although some debit cards have modest rewards programs, they generally don't offer as many perks as credit cards. Rewards programs that offer cash back and travel points are more common among credit cards.
• Fewer protections than credit cards: Debit cards may have fewer protections against fraud than credit cards. Credit card companies are more likely to reimburse you for all purchases made as a result of fraud. By law you can't be held responsible for more than $50 in fraudulent purchases made on a debit or credit card, if they are reported promptly.

What Are the Features of a Debit Card?

Debit cards come with personal identification numbers (PINs) that let you withdraw cash from ATMs. You also can make purchases with these cards. If they come from a credit card issuer, they might offer cashback programs and other perks.

Do Debit Cards Have Purchase Protection?

Purchase protections on debit cards vary depending on the issuer. Generally, debit cards don't offer as much purchase protection as credit cards. You can be responsible for up to $50 of fraudulent purchases made with a debit card or credit card, but many credit card companies extend this protection to zero liability.

Can I Get a Debit Card Online?

You usually can get a debit card online from any financial institution that lets you open a checking account online and provides a debit card. This applies to online banks and traditional brick-and-mortar banks that sign people up digitally.

Can You Be 12 and Have a Debit Card?

The age requirements for financial products like debit cards depend on the bank. Legally, U.S. financial institutions can't provide financial products to minors, but minors still may be able to get a debit card with the inclusion of a parent or legal guardian on the account. To have a debit card in their own name, minors often have to be at least 13 years old. Still, some banks offer cards to children under 13 (in the adult's name).

Can a Merchant Put a Temporary "Block" or "Hold" on My Account If I Buy Something With a Debit Card?

Yes, in some circumstances, merchants can take these steps as protection against fraud, errors, or other losses. One common scenario involves a hotel putting a hold on a certain amount when you use a debit card (or, similarly, with a credit card) to reserve a room.

The Bottom Line

A debit card is a card issued by a bank or credit union to checking account holders that is used to access funds in the account. You can use a debit card to access cash from an ATM or to buy goods or services. Unlike with credit cards, you can't go into debt using debit cards (except perhaps for small negative balances that might be incurred if you have overdraft protection).

If you are considering getting a debit card, compare the fees and potential perks of accounts from different banks.

1. Federal Trade Commission. "Using Debit Cards."
2. Chime. "Chime Visa Debit Card."
3. Credit Union of Southern California. "Do Debit Cards Have Spending Limits?"
4. FDIC. "Overdraft and Account Fees."
5. Wells Fargo. "Selected Terms and Conditions for Wells Fargo Debit and ATM Cards."
6. UFCU. "When and How To Replace Your Debit Card."
7. Consumer Financial Protection Bureau (CFPB). "What Types of Fees Do Prepaid Cards Typically Charge?"
8. Consumer Financial Protection Bureau. "Credit Cards."
9. PayPal. "Business Debit Card."
10. Michigan Department of the Attorney General. "Credit Card v. Debit Card - Know the Difference."
11. Bank of America. "What Is a Credit Card Cash Advance?"
12. Federal Trade Commission. "Lost or Stolen Credit, ATM, and Debit Cards."
13. Washington State Department of Financial Institutions. "Debit Cards Frequently Asked Questions."

Types of Checking Accounts

1. What Is a Checking Account? Here's Everything You Need To Know
2. 6 Different Checking Accounts
3. Joint Checking Account

Checking Account Basics

1. Account Balance
2. Non-Sufficient Funds
3. Routing Transit Number
4. Overdraft Protection
5. Overdraft Protection: Pros and Cons
6. Overdraft Consequences

Opening a Checking Account

1. The Documents You Need
2. Pros and Cons of Checking Accounts
3. Checking Account Beneficiaries

Paying With Checks

1. What is a Check?
2. Bounced Check
3. Do Checks Expire?
4. How to Write a Check

Using a Debit Card

Best Checking Accounts

1. Best Checking Accounts for Teens
2. Best Rewards Checking Accounts
3. Best High-Interest Checking Accounts

The offers that appear in this table are from partnerships from which Investopedia receives compensation. This compensation may impact how and where listings appear. Investopedia does not include all offers available in the marketplace.

A canceled check is a check that has been paid or cleared by the bank it was drawn on and is marked "canceled" so that the check can't be used again.

Overdraft protection is an optional bank account service that prevents the rejection of charges that are in excess of available funds.

A bounced check is slang for a check that can't be processed because the writer has insufficient funds.

A negotiable instrument, such as a personal check, is a signed document that promises an amount to be paid to a specified person or assignee.

A check register is a written record of your checking account transactions that allows you to keep track of your balance.

A sweep account automatically transfers amounts over or below a certain level into a higher interest-earning investment option.

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