How Debit Cards Work

Many of us spend our lives on the go. Between work, school, extracurriculars, and social events, there’s not a lot of downtime.

Every convenience helps when it comes to managing our fast-paced lives, which is one reason why debit cards are such a popular payment option. Nothing beats being able to just tap your card at the gas station and get on with your day. 

Debit cards play a significant role in our everyday lives—and many debit cards offer benefits and value beyond simply being a fast and easy form of payment.

How Debit Cards Work

Debit cards are used to make transactions online and in person using funds connected to your checking account. Using a debit card adds a layer of security to purchases—plus you don’t have to carry around cash or a paper checkbook.

Although they look identical to credit cards, debit cards aren’t tied to a line of credit. When you make a purchase using a debit card, the funds are instantly deducted from your checking account, so there’s no risk of racking up debt.

Benefits of Using a Debit Card

Your debit card can be used for almost any type of purchase, including: 

• Bills
• Groceries and clothing
• School supplies
• Trips and events

Along with that, they offer many unique benefits.

Convenience

Retailers around the world accept Visa and MasterCard debit cards, so you don’t need to worry about having cash on hand. If you do need cash in a pinch, you can easily access funds at an ATM.

For added convenience and safety, you can even connect your debit card to a digital wallet and leave the card at home.

Budgeting

Debit cards make it easier to stick to a budget because you can only spend money that is in your checking account. They also make it easier to track your spending and get a clear view of where your money is going, so you can make adjustments as needed. 

Perks and Incentives

Many banks offer customer incentives like cash-back rewards or points earned on dollars spent that can be redeemed for merchandise, gift cards, travel, or other items.

Auto-Pay

Setting up auto-pay for recurring expenses like childcare, gym memberships, and utility bills means you never have to deal with late fees or gaps in service.

Security

Debit cards provide great protection against fraud and theft. Most banks will notify you if they notice unusual or suspicious activity on your card and freeze your account. If your card is stolen or used fraudulently, your bank will reimburse you for the loss. 

Get the Most Value from Your Debit Card

In addition to the standard benefits listed above, there are several ways to get even more value from using your debit card.

Use Your Bank’s Tools and Programs

Many banks offer customers a range of checking account tools and services—such as online banking and mobile apps—so you can manage your account on the go. 

You may also have the option to enroll in programs like FSCB’s Pocket Change that help you turn spending into savings. Every time you swipe your FSCB debit card, the purchase price is rounded up to the nearest dollar and the difference is transferred to your savings account.

Save Money

Because your spending is limited by your bank balance, there is no risk of incurring interest charges or exceeding your credit limit.

You may also see tax savings by using your debit card instead of your credit card. The IRS uses third-party processors who all charge a flat fee of $2.25-$3.95 when you use a debit card to pay owed taxes.

The fees for credit card payments are adjustable based on a percentage of the total payment (1.87-2.0 percent) or a minimum fee equal to the debit card flat fee. This means that using a credit card could end up costing you more.

Protect Your Account

Visa and Mastercard debit cards have built-in features that protect your account from fraud. For example, embedded card chip security makes your debit card almost impossible to counterfeit.

For even more protection, check with your bank to find out whether they offer a spend alert option that notifies you when your debit card is used and gives you the ability to switch your card off to prevent unauthorized use.

Put Your Debit Card to Work for You

There are a lot of great reasons to use a debit card: convenience, security, and money management. But when you know how debit cards work, you can maximize your value and put your card to work for you.

Want to learn more about getting the most from your bank accounts? Check out A Guide to Understanding Your Checking Account Options to find out why checking accounts are essential, what the different types of checking accounts are, and how to pick the best account for you.