When you have the backing of a bank, you know that you have several financial tools at your disposal to manage your money. One of the most essential and popular are debit cards, which you usually receive for free when you sign up for a checking account.
If you're not familiar with how they work, here's what they're all about.
What is a debit card
A debit card is a financial instrument that deducts money from a checking or savings account when paying/purchasing. They may have other names, such as bank card, ATM card or check card.
Their functionality allows you to use ATMs, get cash advances and purchase products or services.
How a debit card works
Debit cards are rectangular, include a chip, are made of plastic and are very similar to credit cards.
Because they are linked to your account, the money you can spend will depend on the funds you have. They can be considered more sophisticated ATM cards because they are automatically issued and issued by the most recognized companies (Discover, Mastercard, Visa and others).
Whether you are going to buy something, pay a bill or withdraw money, their operation does not change: they withdraw money from the bank account to which they are affiliated.
Advantages and disadvantages of debit cards
When using a debit card, the transaction is the same as if you were paying with cash. In other words, you use your liquid funds and you are not using credit or a loan.
Every time you make a transaction, it is recorded on your account statement, making it easier to keep track of all your expenses.
They are also more secure than paper money because when the cash is stolen or lost, you usually can't get it back. On the other hand, if you lose your debit card, you have the option to deactivate it with the app or by informing the bank. If you suffer a fraudulent withdrawal, the bank will replace the money as soon as possible.
Among its other advantages, it is worth mentioning that they are much easier to get. Even if you have a bad credit score, you only have to open an account to get it.
Unlike credit cards, ATM cards have fewer benefits or protections. The most difficult cases to resolve are identity theft.
On the other hand, you have to monitor your account well so you don't incur overdraft or NSF fees. When you enable autopayments and automated discounts, you can run out of money and not even realize it.
In summary, we have the following:
- They don't generate debt
- Safer than cash
- Easy to obtain without application
- Can incur overdrafts
- Limited by funds or daily limits
- Fewer benefits and protections than credit cards
Fees associated with debit cards
Generally speaking, debit cards are the least expensive banking instruments available. They do not usually include cash withdrawal or annuity fees.
Of course, if you use an ATM of a bank that is not affiliated with your bank's network, then you may be assessed a fee plus other charges.
Something similar could happen when you run out of funds and try to use your plastic. Depending on the financial institution, you may incur an NSF fee, something similar to a bounced check.
If you have signed up for overdraft protection, those fees will apply. If not, the transaction will simply be declined.
Additionally, don't forget the fees associated with a lost or stolen debit card. The first replacement may be free, but after that you will be charged. And if you use it abroad, you may also incur a foreign currency transaction fee.
Frequently asked questions about debit cards
Can I have a debit card when I am 12 years old?
It depends on the bank and its policies. When you are a minor, you must open a joint account with a parent or guardian. To have this plastic in your name, you usually have to be over 13 years old.
Do debit cards include purchase protection?
It varies depending on the card issuer. Generally, they offer no or the same kind of protection as credit cards. With these instruments, you pay more and have less time to report in case of theft or loss.
As you have seen, debit cards are very simple to use, easy to obtain and very inexpensive. If you are interested in knowing more about them, at Busconómico you will find the most popular ones.
Español: Las mejores tarjetas de débito