Money Basics: What is a debit card?

Welcome to Money Basics, Yahoo Finance’s new personal finance series offering quick explanations for some of the most important terms involving your money.

A debit card looks a lot like a credit card and acts like one in some ways, but there are some key differences. A debit card is linked directly to your checking account. The card, which gets validated by a personal identification (PIN) number, allows you to access your money from your bank at any time of day on any day of the week from automated teller machines (ATMs) around the world.

Of course, there are some drawbacks to that accessibility. If you withdraw money from an ATM that is not within your bank’s network, you’ll likely be charged fees both from the bank and the owner of the ATM. And keep a close eye on your balance. If you withdraw more money than you have in your account, you can be hit with pricey overdraft fees.

Swipe! US banks issue more than 165 million debit cards a year.

Debit cards and ATMs have been in use since the late 1960s. They’ve exploded in popularity since then, with non-prepaid debit card payments hitting $59.6 billion in 2015, according to the Federal Reserve.

One reason debit cards are so popular is because they’re so easy to use. Like a credit card, you can use a debit card to make purchases in stores and online.

Keep in mind, however, that debit cards offer much less in the way of fraud protection than credit cards. If you suspect fraud with your debit card, report it to your bank immediately. The longer you wait, the less liability protection you’ll have. If you wait too long to report, you can be liable for $500 or more. Credit cards, by contrast, offer much more comprehensive fraud protections that will leave consumers on the hook for $50 at most in the event of theft, identity theft or other fraud.

Unlike credit and charge cards, payments using a debit card are immediately transferred from your bank account. Keep your debit card safe and, of course, never share your PIN number.

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