What To Know
How do debit cards work?
When you open a checking account at a bank or credit union, you usually get a debit card.
A debit card lets you spend money from your checking account without writing a check.
- You can use your debit card to buy things in a store
- You can use it at an ATM to get cash
When you pay with a debit card, the money comes out of your checking account immediately. There is no bill to pay later.
How do I know where I used my debit card?
Your bank or credit union gives you a “statement” every month. Your statement shows:
- where you paid with your debit card and how much you spent
- where you used the ATM, how much you withdrew, and what fees you paid
- who you wrote a check to and for how much
Your statement can help you track your spending and create a budget.
How is a debit card different from a credit card?
When you buy something with a credit card, you are borrowing money from the credit card company. The credit card company will send you a bill every month for the money you borrowed to buy things.
When you use a debit card, you are using money in your checking account to buy things.
For example, with debit cards:
- You can get a debit card from the bank when you open a checking account
- Money comes out of your checking account when you pay with a debit card
- You don’t pay extra money in interest when you pay with a debit card
- You can use a debit card at an ATM to get money from your checking account
- You do not build a credit history using a debit card
With credit cards:
- You apply for a credit card at a bank or store
- You get a bill once a month for everything you buy with a credit card
- You might pay extra money in interest if you don’t pay all of your credit card bill every month
- You can use a credit card as a safer way to pay for things online
- You can build a credit history using a credit card if you pay the whole bill every month when it is due
Can I use my debit card to buy things online?
Your debit card will work online. But debit cards are not a good way to pay when you shop online.
Credit cards are safer to use when you buy things online:
- You might have a problem with something you buy online. It is easier to get your money back if you use a credit card.
- Someone might steal your credit card number online. The law says you can lose only $50 if you report it right away.
- Someone might steal your debit card number online. The thief can take all your money out of your bank account.
What if I use all the money in my checking account?
You might not have enough money in your checking account. That means your debit card will be “declined.” You will not be able to buy things.
Some banks and credit unions might let you sign up for “overdraft protection.” That means you can use your debit card even when you do not have enough money to pay for the things you are buying. But you might have to pay a fee to the bank. Some banks might charge this fee for every purchase until you put enough money in your account to pay for the things you are buying.
For Example
- I did not know my checking account balance was $1.78.
- I used my debit card three times. I paid for groceries, coffee, and my cable bill.
- My bank charged a $25 overdraft fee every time I used my card.
- The good part: My debit card was never declined. I could buy what I wanted.
- The bad part: Now I owe the bank $75, plus the money I spent.
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