Insights » Money Basics » Debit Cards: All You Need to Know

Debit Cards: All You Need to Know

Debit cards remain the king among payment methods on the European continent due to their convenience and versatility. We use them to buy groceries and airline tickets, pay bills and subscription fees, withdraw cash, and enjoy financial freedom while travelling or living abroad. Debit cards have become an integral part of our everyday finances, so it’s important for anyone who strives to manage their money wisely to understand how they work, how to get one, and what fees may apply for using them. Let’s dig deeper into each of these key points one by one.

What is a Debit Card?

A debit card is a plastic or metal payment card that is linked to your checking account. When you swipe your card at a POS terminal or withdraw cash from an ATM, the money is debited from this account. Thus, the spending limit on a debit card depends exclusively on the available funds in your bank account, and this is what distinguishes it from a credit card that allows the user to borrow funds to make purchases and has a credit limit set by the bank.

There are also prepaid debit cards that are not tied to a bank account and are topped up by the cardholder via an online payment transfer or by loading cash at an ATM. These cards can serve as an alternative to cash in your wallet if you cannot open a bank account for whatever reason, or as pocket money given to kids. Yet they can come with high fees, so make sure you thoroughly go over terms and conditions before you give them a shot.

How do debit cards work? When you swipe your card at a checkout terminal or enter your card details on a website, the merchant’s system sends the transaction data to your card network such as Visa or Mastercard. The card network contacts your issuing bank to approve the transaction. Your bank then places a hold on part of your funds equal to the purchase amount and later releases them to the merchant. The entire process takes just a few seconds.

How to Get a Debit Card

To become a proud debit card owner, follow a few simple steps:

Step 1: Do your research and choose the best option.

Banks may have strict eligibility criteria for opening a checking account, so start with exploring available options and select the ones that you are eligible for. Don’t skip neobanks and other fintechs: they are less demanding and usually do not require you to make the minimum deposit to open an account. This alternative can be a real lifesaver for immigrants and expats struggling to navigate the complicated traditional banking system in their new country.

After that, compare debit card offers from your chosen range of providers, including fees and benefits, and opt for the one that suits you best. For example, you might seek a card with the highest cash back rewards, or you might want to earn miles for purchases and redeem them for flights. Or maybe you are a digital nomad looking for the best exchange rates and lowest international transfer fees? The debit card market is saturated, so you’ll definitely find your perfect fit.

Step 2: Apply and receive your debit card.

There are two common ways to apply: online or at a bank branch. However, if you choose a traditional bank, you may have to make a visit to a physical branch anyway to verify your identity to a bank teller. Challenger banks skip this step and check the documents and data provided by you without your personal presence. Once your account is opened, all you have to do is to wait for your debit card to arrive in your mailbox, which may take from 7 to 14 days.

Step 3: Activate your debit card.

Congratulations, you hold your brand-new debit card in your hand! To start making purchases, you should activate it and set a PIN. To do this, follow the printed instructions provided with the card, or find a how-to guide on the bank’s website or in its mobile app.

How to Use a Debit Card

Debit cards can be used to make purchases online and in stores. When paying in person, you’ll need to dip, swipe, or tap your debit card at the POS terminal and then enter a PIN or sign the merchant’s receipt if required.

Contactless debit cards using either near-field communication (NFC) or radio frequency identification (RFID) technology boomed in popularity during the COVID-19 pandemic, and demand for them has been growing ever since. You just need to bring your contactless card close to the card reader to instantly complete a transaction. Entering a PIN is only required if you make a purchase in excess of the established limit, for example 50 euros. This limit is set to make sure your card cannot be used to make an expensive purchase without your permission if it’s lost or stolen.

If you’re still concerned about possible theft and prefer leaving your wallet at home, you can add your card to a mobile payment service like Apple Pay or Google Pay and make contactless payments using your phone. A digital wallet can also be loaded with a virtual debit card, which has no physical equivalent.

To use a debit card to pay in online stores, select the card payment option and enter the card details in the appropriate fields on the checkout page. Debit cards are also convenient to use for money transfers to family and friends through dedicated peer-to-peer payment apps such as Wise or PayPal. Last but not least, debit cards allow you to use ATMs to withdraw cash, top up your card, check your account balance, or even pay your utility bills.

Debit Card Security

Debit cards are protected by a PIN to avoid unauthorised use, but this protection can hardly be called sufficient. That’s because all the information you need to make a payment, including your account number, security code and card expiration date, is stored on the magnetic strip on the back of your card. This data can be stolen by installing a card skimmer on an ATM or payment terminal and then used to make fraudulent transactions.

However, nowadays many debit cards are equipped with small chips that protect your financial data from theft and illegal use. The chip does not store or transmit your bank account information. Instead, it provides the POS terminal with a one-time code that is valid only for that specific transaction. Unfortunately, not all merchants have the POS equipment capable of reading chips yet, so data theft is still possible.

To protect your money, set up push notifications in your banking app and closely monitor every transaction. If you notice strange charges or discover that your card is missing, contact your bank immediately by phone or online and report the situation. This will help save your money even if fraudsters manage to use your card. Many banks and neobanks allow you to block your card instantly via the mobile app.

3D Secure is another useful feature to enhance protection of financial data when shopping online. Once you enter your card details on the checkout page and confirm the payment, your bank will send you an SMS with a one-time code to be entered in the appropriate box. Without this code, no one will be able to use your card to make online purchases. To make your payments even more secure, use a virtual debit card with 3D Secure protection when shopping in online stores.

Debit Card Fees

Depending on your debit card issuer, you may be charged different fees and commissions. Let’s have a look at the most common of them:

  • Monthly maintenance fees may be charged for utilising a checking account. This is a flat amount that is debited from your account every month. Typically, banks will allow you to avoid these charges by opening a savings account, maintaining a minimum balance in your account, or even setting up automatic monthly deposits for your account.
  • If you don’t have enough funds in your account when you try to make a purchase, your bank may charge you a one-time fee for the failed transaction. To avoid unnecessary waste of money, set up notifications to keep an eye on your account balance and always know if you can afford the purchase you’re going to make.
  • Overdraft fees are levied when you pay for a purchase, or part of it, with the bank’s funds when you don’t have enough money in your account. You can avoid them by opting out of overdraft coverage and monitoring your account balance, so that you’re not charged with insufficient fund fees instead.
  • Foreign transaction fees are charged whenever you make a purchase overseas and can be up to 3% of the purchase amount.
  • Out-of-network ATM fees may be levied by both your bank and the ATM operator, which together can add up to a hefty sum. When you’re abroad, ATM fees are almost inevitable. If you really need cash and there are no ATMs of your bank network nearby, try to withdraw a large amount to pay the fee just once.

Luckily for all of us, many challenger banks today offer debit cards with no additional fees or hidden charges. Be sure to carefully review the bank’s offering and ask customer support or a teller any questions you have about fees before opening an account and ordering a debit card.

Despite some pitfalls, debit cards have proven to be a time-tested, reliable payment method for making purchases online and offline. The main thing is not to grab the first offer that comes your way, but to carefully weigh all the available options and find the optimal balance of fees and benefits. There’s definitely a debit card out there that will fit you like a glove.

Get your free Mastercard debit card with CFPS

With CFPS, you can open an account with no minimum deposit or maintenance fees and then order a free Mastercard debit card that will be delivered to your address in a few days at no cost. With low cash withdrawal fees, no monthly charges and global usage, the CFPS debit card is tailored to digital nomads, frequent travellers and those settling into a foreign country. If you don’t fancy carrying your wallet around, add the card to Apple Pay or Google Pay and make secure payments via your smartphone. Thanks to real-time transaction notifications you can keep track of all your transactions and stay tuned with your budget.


What is a debit card?

A debit card is a payment card tied to your bank account and used for making purchases in brick-and-mortar and online stores, and for withdrawing cash from an ATM.

What is the difference between debit and credit cards?

Debit card transactions are limited by the available funds in your checking account. On the contrary, a credit card pays with funds borrowed from a bank or another credit card issuer, so you will have to pay the money back within the period specified in your credit card agreement.

What is an authorisation hold?

An authorisation hold is a temporary hold placed on a part of your funds until the pending transaction is settled. Once this process is completed, the funds are either transferred to the merchant’s account or returned to your card if the transaction was declined.

Does my credit score affect getting a debit card?

With some exceptions, banks do not check your credit score to decide whether to open a bank account for you or not. As a debit card is linked to your checking account topped up with your own funds, your credit score should not be considered as an important eligibility criterion in this case. Yet, some banks may require the minimum balance in your checking account and will charge you maintenance fees if you fail to fulfil this requirement.

Can debit cards get hacked?

Yes, scammers can steal your debit card details and use it without your permission. To safeguard your hard-earned money, use ATMs at banks, pay by your phone where possible as mobile payment systems encrypt card details, and enable 3D Secure protection for your online purchases. Also, keep a close eye on your transactions through mobile app alerts and report any unauthorised charges to your bank immediately.

How safe are contactless debit cards?

Contactless cards are just as secure as other debit cards. Although they allow you to pay without entering your PIN, the amount for PIN-less transactions is usually limited to prevent fraudsters from spending all your money if the card is lost or stolen. Plus, since a contactless card is usually tapped rather than dipped into the POS terminal, its details are much harder to steal.

Are debit cards free?

Typically, debit cards are issued free of charge or for a small fee, but banks may impose additional fees for account maintenance, cash withdrawal, foreign transactions and other services. Before you apply for a debit card, study a range of offers with different rates and choose the option that’s best for you.

Posted on November 13, 2023