When you open a bank account in the US, you’ll almost certainly receive a plastic card called a debit card. It looks a lot like a credit card, but it works very differently. Understanding how your debit card functions is a basic part of managing your day-to-day finances, whether it’s for buying groceries, taking cash out, or shopping online.
At Remitly, we know that getting used to a new banking system is an important part of settling into a new country. This guide will help you understand how debit cards work, how they connect to your bank account, how to use them for different transactions, how they differ from credit cards, and tips for keeping your card and money safe.
How does a debit card work?
Debit cards are your gateway to accessing your money without cash or checks. Let’s break down the basics and understand how they fit into your financial life.
Overview of debit cards and their purpose
A debit card, sometimes called a check card or bank card, is a payment card issued by a financial institution, like a bank or credit union, that allows you to access the money in your checking account. Its main purpose is to provide a convenient and secure way to make purchases and withdraw cash without needing to carry large amounts of physical currency or write paper checks.
The connection between debit cards and checking accounts
Your debit card is tied to your checking account, a bank account made for everyday transactions. When you use your debit card, the money is usually deducted from your checking account balance almost instantly (though some transactions may take a day or two to fully process). This direct link means you need to keep track of your balance to avoid spending more than you have, as doing so could lead to overdraft fees depending on your bank’s policies and whether you’ve opted into overdraft protection.
Basic functions of a debit card in everyday transactions
Debit cards are versatile and used for many daily financial activities, such as:
- Making purchases: You can use them at stores, restaurants, gas stations, and countless other places that accept card payments (usually anywhere Visa or Mastercard are accepted, depending on the logo on your card).
- Withdrawing cash: You can use your debit card at Automated Teller Machines (ATMs) to take cash directly from your checking account.
- Online shopping: Debit cards can be used for purchases on websites and in apps.
- Bill payments: Some bills can be paid directly using your debit card number, although setting up payments directly from your bank account (ACH) is often preferred.
- International transfers: Use your card as the payment method on services like Remitly to send money abroad.
Step-by-step guide to using a debit card
Using a debit card is easy once you know the steps. Here’s how to make the most of it.
Making purchases with a debit card
When paying at a store:
1. Present your card
The cashier might swipe the magnetic strip, insert the EMV chip into the card reader, or have you tap your card if it supports contactless payment (look for the sideways Wi-Fi symbol).
2. Follow prompts
The payment terminal will guide you.
3. Choose Debit or Credit (sometimes)
You might be asked if you want to run the transaction as “Debit” or “Credit.”
Choosing “Debit” usually requires you to enter your Personal Identification Number (PIN). The funds are withdrawn very quickly. This option sometimes allows you to get cash back.
Choosing “Credit” (even though it’s a debit card) usually requires you to sign (on the screen or a receipt). The transaction is processed immediately, but it might take a day or two to deduct from your account. Cash back is typically not available with this option.
Note that choosing “Credit” doesn’t affect your credit score. Even though the transaction is processed through credit card networks, you’re still using your own money.
4. Complete the transaction
Once approved, take your card and receipt. The purchase amount will be deducted from your checking account.
Withdrawing cash from an ATM
Exact instructions vary, but typically follow this process or something similar:
- Find an ATM: Locate an ATM, preferably one affiliated with your bank, as using an out-of-network ATM could incur fees from both the ATM operator and your own bank.
- Insert your card: Put your debit card into the card slot as indicated, or tap if the ATM supports contactless.
- Enter your PIN: Carefully type in your unique 4-digit PIN on the keypad, shielding it from view.
- Select “Withdraw Cash”: Choose the withdrawal option from the menu.
- Choose account: Select “Checking.”
- Enter amount: Specify how much cash you want to withdraw (within both the ATM and your bank’s daily limits).
- Confirm: Approve the transaction.
- Take your cash, card, and, if requested, your receipt: Don’t forget anything!
Online transactions and PIN usage
Online purchases: To use your debit card online, you’ll need to enter the 16-digit card number, the expiration date, and the 3-digit security code (CVV) found on the back of the card. You normally do not use your PIN for online purchases, although some additional verification may be requested. The funds are deducted from your checking account.
PIN usage: Your PIN is primarily used for ATM transactions and point-of-sale purchases when you select the “Debit” option. Never share your PIN with anyone. Avoid writing it down or using easily guessable numbers.
Debit card vs credit card
Though they look similar, debit and credit cards function very differently.
Key differences in functionality and fees
Source of funds:
- Debit card: Uses money directly from your checking account. You spend your own funds.
- Credit card: Uses a line of credit extended to you by the card issuer. You borrow money and pay it back later.
Impact on funds:
- Debit card: Deducts money almost immediately from your account balance
- Credit card: Creates a balance you owe, which you receive in a monthly statement. You must make at least the minimum payment by the due date.
Interest:
- Debit card: No interest charged (unless you use your overdraft and incur fees/interest on the negative balance)
- Credit card: Charges interest on the borrowed amount if you don’t pay the full balance by the due date
Fees:
- Debit card: Potential fees include overdraft fees (if you’ve opted into overdraft coverage), out-of-network ATM fees, and sometimes monthly maintenance fees for the checking account itself
- Credit card: Potential fees include annual fees, late payment fees, over-limit fees, cash advance fees, balance transfer fees, and interest charges if you carry a balance
The role of banking accounts in both cards
Debit cards are directly linked to and dependent on a specific checking account. The card is a key to access the funds in that account. Credit cards, on the other hand, are not directly linked to your deposit accounts for spending. It’s a separate line of credit. You often link a bank account to pay your credit card bill.
Benefits and drawbacks of each option
| Feature | Debit card | Credit card |
| Pros | Avoids debt (uses own money) | Builds credit history (if used responsibly) |
| Helps stick to a budget | Offers rewards/perks (e.g., cash back, points, miles, travel insurance) | |
| Easy access to cash via ATMs | Stronger fraud protection (liability often limited) and purchase protection | |
| Easier to obtain (usually comes with an account) | Useful for large purchases or emergencies | |
| Generally, fewer fees than credit cards | Often doesn’t charge foreign transaction fees | |
| Cons | Doesn’t build credit history | Risk of debt and high interest charges |
| Spending is limited by account balance | Potential for numerous fees | |
| Weaker fraud liability protection (potentially) | Can encourage overspending | |
| Overdraft fees can be high | Requires application and credit approval | |
| Fewer rewards/perks | Cash advances are expensive |
Getting a debit card
Acquiring and setting up a debit card is usually part of opening a checking account.
How to acquire a debit card from a financial institution
- Open a checking account: Generally, you need to open a checking account at a bank or credit union. Requirements vary but often include providing identification like a passport, driver’s license, or state ID, proof of address, and sometimes a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN). Some banks have options for recent immigrants.
- Request the card: Often, a debit card is issued automatically when you open a checking account. If not, simply request one from the bank.
- Receive the card: The card will usually be mailed to you within 7-10 business days, though some banks might print a temporary card at the branch.
Activation and setting a personal identification number (PIN)
When you receive your new debit card, you’ll need to activate it before use. Activation methods vary by bank but often include:
- Calling an automated phone number
- Activating it online through your bank’s website or mobile app
- Making a transaction at an ATM (sometimes activation online or by phone first)
- You will also need to set up your 4-digit PIN. This is usually done during activation or by calling a specific number/using an ATM prompt. Choose a PIN that is hard to guess, and memorize it.
Debit card security and consumer protections
Keeping your debit card safe is critical to protect your money.
Tips to protect your debit card from fraud
- Guard your PIN: Never share it and don’t write it down where others can find it. Shield the keypad when entering it at ATMs or payment terminals.
- Monitor your account: Regularly check your account statements and online banking for unauthorized transactions. Report any discrepancies immediately.
- Be wary of ATMs: Use ATMs in well-lit, secure locations, ideally in banks or busy areas. Check for signs of tampering (skimmers) on the card reader or keypad.
- Shop securely online: Only use your debit card on secure websites (look for “https://” and a padlock symbol). Avoid saving card details on merchant sites if possible.
- Be cautious with emails/calls: Banks will rarely ask for your full card number, PIN, or CVV via email or phone. Be suspicious of unsolicited requests for information (phishing).
- Use security alerts: Many banks offer text or email alerts for transactions, which can help you spot fraud quickly. See more general tips in our Digital Safety Checklist.
Understanding consumer protections and card issuer policies
In the US, the Electronic Fund Transfer Act (EFTA), implemented by Regulation E, provides consumer protections for debit card transactions. Key points include the following:
Liability limits
Your liability for unauthorized transactions depends on how quickly you report the loss or theft of your card or notice the fraud.
- If you report a lost/stolen card before any unauthorized use: no liability
- If you report within two business days after learning of the loss/theft: maximum USD 50 liability
- If you report after two business days but within 60 calendar days of your statement showing the unauthorized transaction: maximum USD 500 liability
- If you report after 60 days: You could be liable for all funds lost after the 60-day period.
Error resolution
Banks must investigate errors reported by consumers within specific timeframes.
Visa/Mastercard policies
Many card networks (e.g., Visa, Mastercard) offer additional “zero liability” policies, which could provide even stronger protection than federal law if you report fraud promptly. Check your bank’s specific policy to stay in the loop.
Dealing with fraudulent transactions and card loss
- Act immediately: If your card is lost, stolen, or you see unauthorized charges, contact your bank as soon as possible.
- Card deactivation: The bank will deactivate the lost/stolen card to prevent further misuse and will issue you a new one.
- Dispute charges: Identify the fraudulent transactions you are disputing.
- Follow up: Your bank will investigate. They may provide provisional credit while they investigate. Keep records of your communications. File a police report if your bank recommends it, especially for stolen cards.
FAQs
How do I change my PIN?
Visit your bank’s ATM, insert your card, enter your current PIN, select “Change PIN,” and set a new one. Some banks allow PIN changes online.
Is it better to use a debit or credit card?
Debit cards prevent debt but risk overdraft fees and don’t build credit. Credit cards offer rewards, better fraud protection, and can help build your credit score, but they require discipline to avoid interest.
Use debit for daily expenses and credit for larger purchases if you can pay off the balance each month.
Can I get cash back with my debit card?
Yes, many retailers offer this service. Select “Debit” at checkout and request cash back free of charge.
Why is there a limit on how much I can spend?
Banks set daily spending limits (e.g., USD 1,000-5,000) to prevent fraud. Contact your bank for a temporary increase for large purchases.
What are the three numbers on the back of a debit card?
This is a CVV (Card Verification Value) number. It’s a way of verifying that you have the card when you are making online or phone purchases, helping to prevent fraud.