April 27, 2020

How Does a Debit Card Works?

Just like a credit card, the debit card is also plastic money. You can simply swipe the card at the point of sale and make the transaction. Through a debit card, you spend the money which you already have as it is linked to your savings account in which you have accumulated funds. The debit card does not increase your debt burden, although you can avail overdraft facility on your account subject to certain conditions.

Use of Debit Card

The use of a debit card is very much similar to your credit card. Many retailers accept payments through cards which are collected by swiping the card on the POS machine. Although in some cases you might have to inform the lender as to whether it is a debit card you are using or a credit card.

Since the debit card is connected to your savings account, make sure to be careful before swiping your card anywhere. It is particularly because in case your card information is stolen, then thieves can drain your savings account very quickly. Especially in the online arena, exercise due diligence before using your card.

ATM Card

There was a time when banks only issued ATM cards, which can be used only for cash withdrawal from ATMs. However, with a debit card, you can do so much more than just cash withdrawal from an ATM. Using the card directly at the point of sale or making online transactions, the ATM card has now developed into a debit card.

Debit Card and Bad Credit

In case you have bad credit, then a debit card can come in handy when you want to make online transactions or quick checkout at retail stores. In this way, you can avoid carrying cash around with you. However, debit cards do not contribute to building your history, as it uses the money which you already have in your savings account.

Although to improve your credit history, you can get a prepaid credit card which is allotted on the basis of a security deposit and works similar to a debit card but also helps in improving your credit.

Debit Card for Kids

Through the use of a debit card, you can easily teach children how the credit card works. Since both credit card and debit cards have limits, the difference between the two lies in the flexibility of those limits. The flexibility is much higher in case of the credit card than a debit card.

Prepaid Debit Cards

Traditionally, debit cards are linked to your savings account. It allows you to make electronic transactions instead of writing a check or using cash. However, you can also get cards without a savings account and simply on the basis of any deposit. These cards can be used without any approval and credit check. Plus, they help you in avoiding the debt trap as you can only spend as much as you made the deposit for.

Also Read: How to Use and Pay with a Debit Card?


Just like credit cards, banks have introduced a ‘reward’ system with a debit card as well to encourage digital payments. Thus, using your debit card can get you discounts and accumulate points. These accumulated points can then be redeemed for some offers or discounts later on. This means that if you know where you will be spending your money in future, then you can even pick the debit card that will give you the maximum perks and savings.