Debit cards are a form of payment card that links to your checking account. But what exactly is a debit card, and how can you make best use of yours? Discover the ins and outs of debit cards, their distinctions from prepaid and credit cards, and essential tips to stay safe in this comprehensive guide to debit cards. Additionally, learn about the best practices to follow and key considerations when selecting a debit card that suits your needs.
What Are Debit Cards?
Debit cards, also known as bank cards or check cards, are a type of payment card that allows you to access funds directly from your bank’s checking account. When you purchase something using a debit card, the bank immediately deducts the funds from your checking or savings account.
When using a debit card, you’ll typically need to enter your personal identification number (PIN) or provide a signature to authorize the transaction, although the latter is quickly disappearing in favor of the former. The purchase amount is deducted from your account balance, eliminating the need for credit or borrowing, and as a result, no missed payments and no adverse credit impacts.
How Can You Get a Debit Card?
Because debit cards require no “hard” credit check to open (some banks may perform a “soft pull” to verify identity and view your credit profile, but these checks will have no adverse impact on your credit score), they are much easier to access for consumers of any type. Additionally, debit cards have no real age restrictions, meaning specialized products exist for teens to help introduce them to banking and financial responsibility.
Because debit cards are tied to a checking account, the easiest way to get your hands on a new debit card is by visiting the local branch of your preferred bank or credit union and opening a checking account. Most banks and credit unions give you a free debit card when you open an eligible checking account, with the debit cards either issued in person or through the mail within 7 to 10 business days.
A prepaid debit card is another great option if you can’t access a bank account. Prepaid cards are similar to debit cards in that purchases are automatically and instantly debited from the card’s available balance. However, unlike a standard debit card, prepaid cards are loaded before use and are not tied to a checking account.
Here are some of the key differences between prepaid cards and debit cards:
|Prepaid Card||Debit Card|
|Preloaded with funds||Connected to checking account|
|Must be reloaded||Funds replenish with direct deposits|
|No overdraft||Overdraft available|
Plenty of financial institutions offer these cards, from Chase to American Express. Some are even co-branded with companies like Walmart, PayPal, and Kroger. There’s no credit check involved in the application process, so getting one is as simple as submitting the necessary form, which you can generally do online.
Essential Features of Debit Cards
Like credit cards, debit (and prepaid debit) cards offer basic protections to keep you safe while you shop online or in-store. For instance, debit cards are typically associated with card networks such as Visa, Mastercard or American Express, enabling global acceptance. The card network logo on your debit card indicates where it can be used, typically worldwide, although foreign transactions may incur a fee.
Beyond basic protections like Zero Fraud Liability, lost and stolen card reporting, and credit score monitoring, debit and prepaid cards provide other conveniences for cardholders, including ATM access, digital/mobile wallet compatibility with Apple Pay, Google Pay, Samsung Pay, PayPal, and other services, and EMV chip technology for boosted security when shopping.
How to Choose the Right Debit Card
Choosing the right debit card doesn’t have to be tricky. You’ll need to consider various scenarios and pieces of information, such as how often you plan to use your card, how much you plan to spend on your card, and any fees you might incur for using the card (including out-of-network ATM access, foreign transactions, card replacement, overdraft, and other charges).
Consider your needs closely before selecting a new checking account or debit card. Assess your financial goals and spending habits to determine the features and benefits you require from a debit card. Consider factors such as ATM access, rewards programs, international usage, and budgeting tools offered by different banks.
Here are the critical things to look for in a new debit or prepaid card:
|The Most Important Things to Look for with Debit Cards:|
|Fees||Are there monthly fees associated with the account? Are there fees for ATM withdrawals, foreign transactions, etc.?|
|Rewards||Does the card offers a rewards program such as cash back, cryptocurrency, or other types of perks?|
|Payment network||What payment network does the card use? Mastercard and Visa enjoy wider acceptance than Amex, for example.|
|Add. features||Does the card offer ID theft protection, Zero Fraud Liability, or special discounts with select merchants?|
|Account management||Debit cards, unlike credit cards, are tied directly to your bank account balance. Because of that, you should find a program or application that can help you easily keep track your current balance at all times. Many banks have their own free mobile banking apps available to download that serve this function, as do separate third-party companies.|
|ATM access||Even nowadays, the motto “cash rules everything around me” can still apply, such as when leaving a tip at a restaurant or haggling at an outdoor craft market. Always know what your daily ATM withdrawal limit is and any fees charged for taking your cash out to avoid ending up in an embarrassing situation at the register.|
|Credit building||Some debit cards now offer the ability to build credit with purchases. These debit cards act like secured credit cards, with the spending limit tied to the balance in your checking account.|
Additionally, carefully research the bank’s reputation for customer service quality and availability, including 24/7 support and quick resolution of any issues. Reliable customer support can be crucial in emergencies or when dealing with potentially fraudulent activities. BestCards helps streamline this process by providing bank and lender ratings in reviews, helping to highlight what our team, the Better Business Bureau, and Trustpilot think about each issuer.
Best Practices for Using Debit Cards
Once you get your new debit card, you will probably want to use it to get the stuff you want. Before doing so, ensure you are ready to follow best practices designed to safeguard you while you shop or bank.
Keep Your Info Safe
Treat your debit card like cash by keeping it secure and always avoiding sharing it with others. Additionally, memorize your PIN and avoid writing it down or sharing it with anyone. Be cautious when entering your PIN at ATMs or point-of-sale terminals to prevent others from observing it.
You should also regularly monitor your account for fraudulent activity. Keep a close eye on your account activity by reviewing your statements or accessing your account online. Report any suspicious or unauthorized transactions to your bank immediately.
Stay vigilant against phishing attempts, which are fraudulent messages or calls that appear to be from your bank or a trusted source. Be cautious about sharing personal or financial information via email, phone, or other electronic channels, such as your card number or PIN. Remember, your bank will never ask for your PIN or additional sensitive information via email or phone. If you receive such a request, it is likely a scam.
Maintain accurate contact details with your bank, including your current phone number and email address. This will ensure you receive important notifications and alerts regarding your debit card transactions. Also, familiarize yourself with the security measures provided by your bank, such as two-factor authentication, secure online banking portals, and real-time fraud monitoring systems. Utilize these features to enhance the security of your debit card transactions.
Staying safe with a debit card is about more than fraud or theft. You also need to be wary of financial hardships through overspending or other unwise behaviors. Some banks offer the option to set spending limits on your debit card, which can help you stay within your budget and minimize the risk of fraudulent transactions. Contact your bank to inquire about this feature and set appropriate limits.
You should also be aware of your account’s overdraft policy and maintain a sufficient balance to avoid incurring overdraft fees. Some banks offer overdraft protection services, such as linking your debit card to a savings account or a line of credit, which can help prevent overdrafts.
Familiarize yourself with any foreign transaction fees or currency conversion charges associated with your debit card. Consider using an alternative payment method abroad, such as the local currency or traveler’s cheques.
Summing It Up
Debit cards offer a convenient and secure way to manage personal finances, providing direct access to funds without the risk of debt. Understanding the differences between debit cards and credit cards and implementing best practices for usage will empower you to make informed financial decisions. By considering your needs and conducting thorough research, you can select the debit card that best suits your requirements and enhances your banking experience.
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