A debit card adds both security and convenience to managing your money. But how exactly can you get one? We’ll explain all of the details, from how to take advantage of beneficial features to what kind of fees you can expect to pay.
You’ll even learn how to monitor your debit card and keep your finances as secure as possible. Ready to get started?
Table of Contents
- 1 What is a debit card?
- 2 What fees are associated with debit cards?
- 3 Are debit cards secure to use?
- 4 What if your debit card is lost or stolen?
- 5 How do you make online purchases with a debit card?
- 6 Can you sign up for autopay with a debit card?
- 7 How do you stop an autopay bill on your debit card?
- 8 What is a pre-paid debit card?
What is a debit card?
Simply stated, a debit card, sometimes referred to as a bank card, check card or ATM card, is a method of transferring money from point A to point B.
It is a method of payment used instead of checks or cash when making a purchase or payment through credit card payment networks such as MasterCard or Visa.
While a debit card looks nearly identical to a credit card it acts more like a check when making purchases. Instead of charging a debt, the card instead draws money from your checking account.
Unlike a check, which can take days to be deposited and then transferred from one bank to another, a debit card works instantaneously. Debit cards may also be used by mobile payment apps such as Square, PayPal Here, or other credit card readers.
Unlike the typical POS equipment found in larger retailers, these mobile payment devices are typically used by smaller businesses and are attached to cell phones or other mobile device’s through their headphone jack.
Other services like Apple Pay are trying to eliminate the need for a card at all, allowing you to simply tap your phone and initiating the transaction.
While debit cards are largely designed to eliminate the need for you to carry cash, they were originally designed for you to be able to easily remove cash from your checking account. Before the invention of automated teller machines (ATMs), customers had to wait until a bank opened before removing cash from their accounts.
With the advent of the ATM, customers were no longer beholden to bank hours. With the swipe of a card and a four digit code, customers could now withdraw and deposit money any time of day or night.
What fees are associated with debit cards?
While most debit cards are free from your bank when you open a checking account, there are fees associated with your card. The main fee you’ll likely encounter is the ATM fee.
If you are using an ATM outside of your bank’s network you’ll likely be charged up to $3 per transaction to withdraw money from their ATM.
These can add up quickly so it’s a good idea to use a bank with a large enough ATM network to serve your needs. The fees are static, so whether you withdraw $20 or $200, the amount charged will be the same.
Your bank may also charge you a replacement fee if your card is lost or stolen. This is a one time fee to replace your card and is usually only charged in these instances. If your card has expired, your bank typically issues a new card and will likely not charge you a replacement fee.
Overdraft or insufficient fund fees are other fees charged by your bank. In this instance, you have spent more money than is actually in your bank account. If you overdraw your checking account, the bank may honor the payment instead of denying the transaction.
If you have overdraft protection the bank will automatically move money from another account, such as a savings account, into your checking account to cover the costs.
If you do not have overdraft protection and the bank honors the payment, you’ll have a negative balance in your checking account and your bank will charge you a fee. The amount is usually between $30 to $35 and will be owed to the bank in addition to the negative balance due to a purchase.
Are debit cards secure to use?
Debit card and credit card fraud is a big business, with credit card companies and merchants losing almost $22 billion in 2015. That number is up almost $5 billion dollars from the previous year.
If you consider the total amount of loss back in 2000 was just $3 billion, it’s obvious that banks need to do something to stem this tide of fraud.
To help prevent as much fraud as possible, credit and debit card companies started introducing EMV chips to their cards in 2015.
EMV stands simply for EuroPay, MasterCard, and Visa, who are the three companies that developed the technology. It’s now managed by EMVCo, a consortium including American Express, China Union Pay, Discover, as well as the founding companies.
You’ve probably noticed that at most retailers you’re now asked to insert your card into a reader instead of swiping your debit or credit card. This is a level of security used to protect the bank, the retailer, and you from fraud associated with spoofed cards and other forms of debit and credit card fraud.
What if your debit card is lost or stolen?
While the roll out has not been completely smooth and some retailers still require you to swipe your card, banks are committed to eliminating bank fraud. But what happens if your card is lost or stolen?
Banks offer certain protections against the misuse of stolen debit cards but it is important to act quickly. Call your bank to have your card deactivated or frozen as soon as you realize it’s missing.
The longer you wait, the more you’re personally liable for charges incurred on your debit card. If you report a card missing or stolen before any fraud occurs, you are not liable for any amount charged to your account.
If you report it within two business days of it being stolen and misused, you’re only held liable for up to $50 in charges. Report it within 60 days and that number jumps to $500. If you wait 60 days or more to report your card missing or stolen, your are legally liable for all deductions from your checking account.
How do you make online purchases with a debit card?
Purchases using your checking account’s debit card aren’t just limited to a physical storefront. In fact, it’s estimated that by the year 2020, ecommerce sales will eclipse $500 billion a year in the United States alone. Making purchases online can save you time and money eliminating long lines and other headaches.
If you’re purchasing an item from a company that does not have a physical presence in your state, it’s likely that you don’t have to pay sales tax. It’s also easy to search for who has the item in inventory, who has the best price, and the fastest shipping.
But while purchasing items online can make shopping much easier, it can also make fraud much easier as well. Luckily, banks take precautions to ensure your safety here, too.
Because the retailer cannot physically see the card credit, card processors add an extra layer of protection with a CVV code. In addition to asking for your card number and expiration date, online sales forms also request your CVV code.
With a MasterCard or Visa, this three digit code can be found on the back of your debit card. In the case of American Express, it is a four digit code found on the front of the card. The additional request of this code helps establish your identity and reduce fraud especially when a card is not physically present.
Can you sign up for autopay with a debit card?
With a recurring payment, sometimes called autopay, the cardholder authorizes periodic charges to their debit card which are taken from the cardholder’s checking account. This recurring payment can be variable, such as monthly payments to utility companies for gas or electric.
They can also be static, like a monthly Netflix or Spotify subscription. Recurring payments can be a simple way to ensure you pay your bills on time each month. They help you avoid late fees if you’re forgetful and free up time for those with a lot on their plate.
That being said, it’s important to keep track of these payments for a few reasons. Staying on top of recurring payments, especially if they are variable like electric bills, helps you keep track of how much money you have in your checking account.
Electric bills can vary wildly from season to season and even from month to month. You likely have the option to have email or even text alerts set to inform you of the date and amount withdrawn from your checking account. Set up these alerts so that you’re up to date on the status of your accounts.
It’s also a good idea to review your checking account from time to time looking for rogue autopay. These can come in the form of nefarious companies that have tricked you into paying small amounts of money monthly, quarterly, or annually when you didn’t realize you had done so.
A famous online flower store was caught a few years ago using this tactic to bill one time customers over and over again for services that they never used.
How do you stop an autopay bill on your debit card?
More likely though, you may find services that you’re paying for but that you no longer use. Autopay is becoming more and more common, especially with streaming video and audio services. Netflix, Amazon Prime, HBO Now, Hulu, Spotify, Pandora, and Deezer are just a few examples of streaming services that you may subscribe to.
With all of these options, it’s possible that you’ve even forgotten you signed up for some and are paying for a service that you no longer use.
If this is the case, it’s a good idea to call the vendor and ask them to cancel your subscription. If you haven’t been using the service for some time, they may even give you a refund for some of those charges. After all, it never hurts to ask.
If you have requested a vendor to cease charging you and they refuse, you can then go to your bank and tell them to refuse the charges. You have 60 days to dispute it with your bank, so it’s best to stay on top of your statements and keep an eye out for any anomalies.
What is a pre-paid debit card?
While most debit cards are connected to a checking account, there is also another kind called a prepaid debit card. These cards, sometimes referred to as gift cards, can be purchased at retailers for specific amounts of money and used just like a credit or debit card.
Prepaid debit cards can have some significant downsides. In most cases, a prepaid card can be used by anyone who possesses it. If you lose your card or it is stolen, there is little you can do to recoup your money.
Additionally, prepaid debit cards charge larger fees such as ATM fees and monthly fees. If you are going to use a prepaid debit card, it’s a good idea to shop around and read the fine print. There are a lot of options out there with a wide range of terms and conditions.
Using a debit card instead of cash or checks can be convenient and safe compared to other methods. Still, it’s a good idea to stay watchful. Fraud associated with credit and debit cards is at an all-time high. Banks and financial institutions are fighting back, but ultimately it’s up to you to use your cards wisely.