What Is a Debit Card and How Does It Work?

What is a debit card?

Debit card definition: A debit card is a payment card that lets you make secure and straightforward 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 or a “buy now, pay later” service; the money on your debit card is your own. You can also use your debit card to withdraw or deposit cash at ATMs.

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

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 and want to try using a prepaid debit card instead, turn to NerdWallet’s list of best prepaid debit cards.

• 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 uses money directly from your checking account for purchases or ATM withdrawals. If a debit transaction puts your account into a negative balance, you may be subject to overdraft fees.

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.  If you don’t pay the amount on time or in full, you may be subject to late fees or interest fees.

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 nonsufficient funds fee: Sometimes $35 or higher, 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 deposited into your account on a monthly basis.

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

Call your bank immediately, and follow up in writing. You can be responsible 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: