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What is a debit card, and how does it work?

Sarah C. Brady · Contributor

Wed, May 22, 2024 4 min read

Learning how to use a debit card is a key step to managing money with confidence.

When you open a checking account, you're likely to receive a debit card in the mail soon after. Then, if you want to make a purchase from your checking account or withdraw money via ATM, you can use the debit card.

While debit cards look nearly identical to credit cards, you don't want to get the two confused. Sure, you don't have to take on debt when you use a debit card, but your card can still get you into trouble if you spend more money than you have in the bank.

Debit card definition

A debit card is a payment card issued by banks and credit unions that can be used as an alternative to cash to make purchases. Debit cards are usually tied to a checking account, though in some cases, you might get a debit card for your savings or money market account.

You can use your debit card to pay for in-person and online transactions using the money available in your linked bank account. You can also use a debit card to withdraw or "debit" funds from your bank account at an ATM. When you use your card, the money for the transaction is automatically withdrawn from your account.

Although you'll see a credit card logo on your debit card, that does not mean it's a credit card. It simply means you can use the debit card wherever that credit card brand is accepted for payments. Here's what you'll see printed on your physical debit card:

Your name
The name of the issuing bank
Your account number
The card's expiration date
A credit card logo
A security code (on the back)

How do you use a debit card?

You can use your debit card to spend or withdraw funds from the bank account it's linked to. Here's how it works:

For in-person purchases or ATM withdrawals, tap or swipe the card. For online purchases, enter your card information.
You may need to provide your personal identification number (PIN) or your signature to complete the purchase.
If you have enough money, the funds are automatically removed from your account to cover the transaction. If not, the transaction can be declined.

After a transaction, you can see a record of the event by logging into your online banking portal, or by viewing your monthly account statement once it's available.

Debit vs. credit card

A credit card lets you borrow money for purchases and then pay the money back over time. However, you could be subject to high interest charges and fees if you don’t pay the full balance by the due date.

With debit cards, on the other hand, you don't borrow money. Instead, you draw from funds currently available in a bank account.

Here are a few key ways debit cards are different from credit cards:

Transactions don't involve borrowing money.
You use your own funds to cover purchases.
No interest is charged on purchases or ATM withdrawals
Account activity doesn't help you build credit history
Most debit cards don't earn rewards (though some do)

Another important difference is you can avoid steep fees — often around 2.3% of the transaction amount — by using a debit card instead of a credit card to cover certain payments, including rent, some household bills, and loans.

Watch out for debit card fees

Debit cards may seem harmless compared to credit cards, but they come with their own unique fees. Before you choose a bank account and start using your debit card, make sure you understand the fees you might incur, including:

Overdraft or non-sufficient funds (NSF) fees
Minimum balance fees
Monthly service or maintenance fees
PIN-based transaction fees
ATM fees

What is overdraft protection?

Depending on your checking account, you might have the option to sign up for overdraft protection, which allows you to make a purchase even if you don't have enough money in your account to cover the full cost. However, you'll have to pay a fee in the range of $25 to $35 each time you overdraft, and you may be charged an additional fee for every transaction you make until you pay back the full overdrawn amount.