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When you open a checking account, the bank usually issues you a debit card.
If you’re like most consumers, you haven’t given that card much thought. After all, you don’t really have a choice about which debit card to choose. Or do you?
Believe it or not, there are a few different types of debit cards to choose from, each with their own advantages.
Once you learn about each type, you can choose the card that’s right for you.
What is a Debit Card?
All debit cards work in a similar way, functioning like a written check. When you make a purchase with a debit card, the amount of the purchase gets deducted from your checking account. You won’t be able to spend more than what you have in your account, which is great when you’re trying to stick to a budget.
Most debit cards also function as ATM cards, allowing you to withdraw cash from your checking account. Again, you won’t be able to withdraw more than you have in the account. As long as you have your PIN, you can withdraw cash from an ATM machine or store.
Types of Debit Cards
Each different type of debit card has its own benefits and drawbacks. Knowing your financial goals and challenges will help you choose the type of debit card that’s right for you.
A check card is a general term for a type of debit card that functions like writing a check. This card withdraws money directly from your account to pay for a purchase. Typically, a check card is backed by Visa or Mastercard and can be used at most merchants.
Keep in mind that using a check card won’t improve your credit score. It’s not considered a form of credit and isn’t tracked by the credit bureaus. If you’re looking to build your credit history, it’s better to use a credit card for the majority of your purchases.
When using a debit card, you should always keep a close eye on your spending and your checking account balance to make sure you don’t overdraw your account. You usually have to give permission to your bank if you want to allow overdrafts.
If you haven’t done that, an overdrawn transaction should be declined. When you do allow overdraft transactions, you’ll be charged an overdraft fee. Be sure to look into your bank’s policies before deciding whether to allow overdrafts on your card.
Visa Debit Card
A Visa debit card is backed by Visa, a credit card processing network. When you use a Visa debit card, the transaction can be processed in one of two ways. One option is to use your PIN number to verify the purchase. In this case, the request for payment is sent directly from a merchant to your bank.
With a Visa debit card, the transaction can also be authorized via the credit card network. You’ll need to sign in order to verify the purchase. When you use this option, the retailer temporarily borrows money from Visa until they withdraw the funds from your account.
Mastercard Debit Card
Mastercard debit cards function the same as Visa debit cards with no practical differences between the two. Visa and Mastercard are actually just payment processing networks, which means they handle the transaction between the bank and the merchant. Both Mastercard and Visa are widely accepted, both in the U.S. and internationally.
A handful of retailers only accept either Visa or Mastercard. For example, Costco only accepts Visa. Otherwise, Visa and Mastercard are almost universally accepted, and there won’t be much difference between a Visa and Mastercard debit card.
Maestro Debit Card
Maestro is a debit card service owned by Mastercard, more commonly seen in Europe. Like a typical debit card, Maestro cards require a PIN to verify the transaction.
If you’re a frequent international traveler, you can use your Maestro card at any Mastercard-owned ATM. The Maestro debit card allows you to immediately withdraw funds in the local currency.
Prepaid Debit Card
A prepaid debit card offers some budgeting advantages over other cards.
In order to use a prepaid debit card, you first have to purchase one and load funds onto the card before you can make purchases. You can load your prepaid debit card via cash, check, or online transfer. This type of debit card isn’t linked directly to your bank account.
There are a couple of advantages to a prepaid card. For one, it’s easy to obtain and doesn’t require a credit check. Prepaid cards are great for people who don’t have a bank account but still want to make online purchases.
A prepaid card will keep your spending completely within your budget since there’s no way to spend more than you loaded onto the card. You also know that if you lose a prepaid card, you’re only out the amount on the card. The rest of your bank accounts aren’t in jeopardy.
An ATM card is not associated with a credit card network like Visa or Mastercard. You can use your PIN number to authenticate a transaction with your ATM card, but the signature option isn’t available. The transaction will be sent directly from the merchant to your bank rather than through the credit card network.
You can only use an ATM card at an ATM machine, so you’ll be more limited than you would be with a Visa or Mastercard debit card. If you have a cash budget, the ATM card may be all you need.
An EMV card is a debit card with an extra layer of security. EMV cards have an embedded computer chip, which is much harder to copy than magnetic stripes. The encrypted data in the computer chip must match the user’s PIN number. These precautions make the EMV card less susceptible to fraud.
You will insert an EMV card into the card reader instead of swiping it. The technology is rolling out quickly in the U.S. and many cards now have EMV technology.
Debit Card FAQs
Here are some of the most commonly asked questions about debit cards.
What’s the Difference Between a Debit Card vs. an ATM Card?
A debit card gives you more flexibility. It’s backed by a credit card network like Visa or Mastercard and can be used at most merchants.
A debit card can be processed in two different ways. The first way is to verify with your PIN number and have the transaction sent directly to your bank. The transaction can also be run through the credit card network and verified with a signature.
An ATM card can only be used at an ATM machine and must be verified by your PIN number. This type of transaction always goes directly to your bank.
How Do I Choose the Right Type of Debit Card?
For most people, a traditional debit card is a good choice. Debit cards are typically accepted wherever credit cards are allowed.
In special circumstances, other types of cards might work better. If low credit is keeping you from getting a debit card, a prepaid card can work well. This card can be used wherever Visa and Mastercard are accepted, but a credit check isn’t required. There also might be an activation fee.
If you’re trying to stick to an all-cash budget, an ATM card might be appropriate. You’ll be able to withdraw funds and then spend the cash throughout the month.
How Many Debit Cards Do I Need?
You need one debit card for each cardholder on a given bank account. If you have multiple accounts, it’s helpful to have a debit card for each.
Who Needs a Debit Card?
Anyone with a bank account would benefit from a debit card. Some people only use a debit card to withdraw cash or check their account balance at an ATM. If you’re really struggling to stick to a budget, a debit card can keep you from overspending. It offers the flexibility of a credit card with a built-in spending cap.
A debit card or ATM card is also essential if you have a cash budget because you’ll need a way to withdraw money if your bank is closed.
For someone who doesn’t have great credit but still wants the ability to use a card for purchases, a pre-paid card is a convenient option. Whatever your financial goals may be, there is likely a debit card that will meet your needs.
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