Using a Debit Card

Not all card swipes are created equal. A debit card may look like a credit card, but instead of borrowing money to make purchases, debited funds come directly from your checking account balance. You don’t pay interest with a debit card, and you don’t build your credit history, either.

Like cash, debit card payments are often subtracted instantly, but some purchases may take a few days to clear your account. If you don’t have enough money, purchases typically won’t go through.

Your checking account may include overdraft protection, where you can use a debit card even without money to cover a purchase in your account by borrowing from your financial institution. But overdraft protection usually comes with a big fee, so you could end up paying a $35 fee on a $5 purchase. Plus, you have to repay the money you borrowed, too.

You’ll receive a debit card when you open a checking account. You can use this to pay for goods and services, and also to withdraw cash from an ATM. If you use the ATM at your bank, this is usually free. If you use an ATM that isn’t associated with your bank, you’ll be charged extra fees. You’ll see a warning about extra charges and can decide whether or not to withdraw money.

Even if you have more money in your account, most debit cards limit how much you can spend every day, and how much you can take out of an ATM.

When you set up a debit card, you receive or create a personal identification code, or PIN, which is a four-digit security code. You enter your PIN on a keypad most of the time when you use a debit card. Your PIN is always required to withdraw money from an ATM. Never share your PIN with anyone, and don’t store it in your wallet or write it on your card. The point is to make sure you’re using the card, not someone else. So make sure only you know it!

You can make purchases with your debit card anywhere a credit card can be used. Debit cards work online, too, but this comes with a higher risk. If your debit card number and pin are stolen, thieves can access all your money.

There are federal laws that protect you from debit card fraud, but only if you report the fraud right away. And if money is gone from your account, it could take a while to get it back. You’ll have more protections if you use a credit card for online purchases.

Because debit cards only use money you have in your account, you don’t build your credit history by using one. But they are a convenient way to store and spend your money without the risk of walking around with a wad of cash.