Debit cards look and act much like credit cards, but there is an important difference. Credit card charges represent, in essence, a loan from the creditor or card issuer. When you use your credit card to pay for a washer and dryer, for example, the money is then paid by the creditor to the store owner on your behalf. You are then required to repay that amount in addition to any interest charged in exchange for the privilege of the loan. Credit cards allow spending up to a predetermined limit.
When you use a debit card the money you spend comes directly from the associated account. So if your checking account comes with a debit card, each time you use the card the funds will be debited directly from your checking account. Unlike credit cards debit cards do not allow spending up to a determined limit. Spending is instead restricted to the amount you have on account at the time.
It is evident from increased use that debit card holders enjoy the convenience these plastic cards offer. No more checks to write and sign, usually no id to show, and often no signature is required for these transactions. You can make purchases by swiping your card through the card reader and signing as you would with a credit card or you can use a pin number. PIN (personal identification numbers) or secret codes help protect you from fraud. At the time of card issue you are asked to select a four digit number that you will use to access account information (use the ATM-automated teller machine) or make purchases.
When choosing a PIN number it is important to select numbers that you are likely to remember, but that no one else can easily guess. Numbers you should try to avoid are birthdates, portions of your social security number or your house number.
Using a debit card offers many of the conveniences that are offered with credit cards. For example, your card issuer may provide protection against faulty products or against theft with guarantees that stolen funds will be returned to your account within 48-hours.
A debit card gives you the convenience of plastic with none of the hassles such as interest charges and late fees. Debit cards can also help you stay on budget because there are no loans involved; you spend only the cash available to you in your account. These cards are a great advantage for the budget conscious as well as those that have committed themselves to cash only spending.