What Is a Debit Card and How Does It Work?

Spencer TierneyJune 30, 2020
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What is a debit card?

A debit card is a payment card that lets you make secure and easy purchases online and in person by drawing money directly from your checking account. You're not borrowing from a line of credit like you would with a credit card; the money on your debit card is your own. You can also use a debit card to access your cash at ATMs.

» More from NerdWallet: See our picks for best checking accounts

In addition to cash registers and ATMs, debit cards work with mobile payment platforms like Apple Pay, Samsung Pay and Google Pay, as well as with many money transfer apps such as Venmo and Cash App.

Frequently asked questions

When you open a checking account at a bank, you typically receive a debit card. When you use the card to buy something — such as by swiping it at a cash register or entering its account number at an online retailer — the money is pulled directly from your checking account.

Yes, some debit transactions carry fees, though they’re often avoidable. Fees may be charged for using an ATM outside your bank’s network or using the card in another country, for example. Read on for more about common debit card fees.

A typical ATM card is used only for withdrawing cash from a machine, rather than making purchases at retailers.

Here's how to get a debit card

  • Open a checking account. Most banks and credit unions give you a free debit card when you open a checking account. Activate it by following the instructions you’re given and set up your PIN for ATM use and purchases.

  • Consider a prepaid debit card. If you don’t have access to a bank account, an alternative is a prepaid debit card, which also allows you to make purchases. Turn to NerdWallet’s list of best prepaid debit cards for picks with useful features and low fees.

  • Check out other related products and accounts. If you want to build credit, a secured credit card may be a better fit for you. Or, if you're unable to get a regular checking account, opt for a second chance checking account.

» Ready to make a move? Here's how to open a bank account

What's the difference between a debit and credit card?

Debit cards require users to pay now, as the card pulls money directly from your checking account for purchases or ATM withdrawals.

Credit cards allow you to pay for your purchases later. You are essentially borrowing money from the credit card issuer with the understanding that you can pay the money back at the end of your statement period.

What's the difference between a debit and an ATM card?

Whereas a debit card can be used to make purchases as well as withdraw cash from an ATM, a typical ATM card is used exclusively for withdrawing cash from a machine.

The exception is when the ATM card has a Visa or MasterCard logo, in which case it functions like a debit card and immediately withdraws funds from your bank account.

What's the difference between regular debit cards and prepaid debit cards?

While regular debit cards perform a real-time transaction from your bank account every time you make a purchase or ATM withdrawal, prepaid debit cards require you to load the card in advance via cash, checks, online transfers or a visit to a retailer.

Prepaid debit cards can be a good option for people who don’t have access to a bank account but don’t want to use cash for their online purchases. Keep in mind, however, that prepaid cards don’t help you build credit.

Here are some typical debit card fees

Debit card transactions are not always free. Here are some costs to watch out for:

  • Out-of-network ATM fee: Usually around $3. This occurs if you use an ATM that isn’t in your bank’s network.

  • Foreign transaction fee: Usually 1% to 3% of the transaction amount. This occurs if you make purchases or ATM withdrawals outside the U.S. (See what big banks charge.)

  • Debit card replacement fee: Generally a small fee, sometimes free (expedited delivery may cost more). This occurs if the card is lost or stolen and you need another one mailed.

  • Overdraft or non-sufficient funds fee: Around $35, but often lower for online banks and credit unions. This occurs if you spend more than you have in your checking account. (See what big banks charge for overdrafts.)

  • Monthly fees: Some banks charge monthly account maintenance fees for checking accounts and — by extension — debit card holders. However, these fees can usually be waived if you maintain a minimum balance or have a certain amount of money direct deposited into your account on a monthly basis.

Here's what to do if your debit card is stolen

Call your bank immediately. You can be on the hook for charges made on a lost or stolen debit card, depending on when you report the loss or theft to your bank. Here’s the maximum you are responsible for based on when you report the loss or theft:

  • Before any fraudulent charges occur: $0.

  • Within two business days: $50 limit.

  • Within 60 calendar days: $500 limit.

  • After 60 days: No protection.

Best debit cards

Debit cards are available when you get a checking account. Here's a close look at several checking options with debit cards that earn rewards or help you avoid fees.

Discover Bank Discover Bank Cashback Debit
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Best for rewards: Discover's Cashback Checking

  • 1% cash back on up to $3,000 in qualifying debit card purchases.

Cashback Debit details from Discover: "ATM transactions, the purchase of money orders or other cash equivalents, cash over portions of point-of-sale transactions, peer-to-peer (P2P) payments (such as Apple Pay Cash), and loan payments or account funding made with your debit card are not eligible for cash back rewards. In addition, purchases made using third-party payment accounts (services such as Venmo® and PayPal™, which also provide P2P payments) may not be eligible for cash back rewards. Apple, the Apple logo and Apple Pay are trademarks of Apple Inc., registered in the U.S. and other countries."

Axos Bank® Axos Bank® Rewards Checking
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at Axos Bank®, Member FDIC

Best for ATMs: Axos Bank's Rewards Checking

  • Unlimited ATM fee reimbursements in the U.S.

Schwab Bank Schwab Bank High Yield Investor Checking®
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Best for travel: Charles Schwab Bank's High Yield Investor Checking

  • Unlimited ATM fee reimbursements worldwide.

  • No foreign transaction fees.

Capital One Capital One 360 Checking®
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Best for travel: Capital One's 360 Checking

  • No currency conversion or foreign ATM fees.

  • Checking account has no monthly fees and earns a small amount of interest.

Simple Simple Account
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Best for avoiding overdrafts: Simple’s Fee-Free Checking Account

  • No overdraft or non-sufficient funds fees.

  • Safe-to-Spend budgeting tool linked to debit card.

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