How Do Debit Cards Work?

Accessing Cash

You can get cash by using a debit or a credit card, but they are very different transactions. When you want cash and you use a debit card, you are withdrawing money you already have in your bank account. But when you want cash through your credit card, called a cash advance, you are taking out a loan. You must pay back the loan, and you will typically pay a high interest rate for the transaction, making getting cash from your credit card an expensive option. It costs you nothing to withdraw cash from your own bank using a debit card.

Debit Card Fees

Sometimes fees are associated with debit cards when you use them.

• You pay a fee when you withdraw cash with your debit card at an ATM that is not associated with your bank. According to a Bankrate survey it costs you an average of $2.60 every time you use an out-of-network ATM. Your bank might also charge you for using an out-of-network ATM — an average of $1.53. If that happens, you spend $4.13 every time you withdraw cash from an ATM that is not your bank’s.
• There are two ways to use your debit card for purchases: you can use your debit card as a credit card or as a debit card. Using your PIN means you run the card as a debit card, and signing the receipt means you run the card as a credit card. Some banks charge a fee when you use the debit card for purchases when you enter your PIN instead of signing for the card.
• If you make a purchase using your debit card for more than what you have in the account, you will be charged a fee if you opted to have overdraft protection. The bank, in that case, would cover your overage, but it would charge you a fee for doing so. The median charge is $34, and most overages are for less than $25, according to the Consumer Financial Protection Bureau

Daily Withdrawal Limits

You can withdraw only a limited amount of money each day from an ATM using a debit card. Each bank has different limits, and different customers could have different limits, too. The usual limit is no more than $1,000 a day. And, of course, you cannot withdraw more than what you have in the account. So now, you should have your question of how debit cards work answered.