Debit cards: The ins and outs of how they work

Many people manage money with a plastic card called a debit card. But what is a debit card? To put it simply: A debit card is a payment card that takes money directly from your bank account. 

More and more places are going cashless. But how do you pay without cash? Ding ding ding — you can use a debit card. Swipe, tap, or insert the card to buy something, and the money comes right out of your bank account. There’s so much to learn about debit cards. But don’t worry — we’re breaking it down for you.

Are you ready to learn more about debit cards and how they work? Let’s dive in.

How does a debit card work?

When you open a bank account, the bank might ask if you'd like a debit card to go with the account. If you say yes, they’ll mail you one. This takes around seven to ten days, but you can start using it as soon as it shows up in the mailbox. 

Using a debit card is simple: First, you visit a store. You decide to buy something and insert your card in the reader. Instantly, the reader transfers the data to a payment processor. The processor contacts the issuing bank, which is the bank you have your account with, and they respond by approving the request. As soon as this happens, the money for the purchase comes out of your bank account, reducing your available balance.  

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Each time you use the debit card, it reduces or "debits" your available funds in the account. Think of a debit card as a key to accessing money you deposited in your checking or savings account. Your bank will ask you to set up a PIN to use with the card. Remember those digits, because you'll need them to withdraw cash from ATMs. You’ll also need that PIN to make purchases if you choose “debit” on the credit card processing device. 

Your debit card works online too — just enter the card details when you’re paying for something. And if you need physical cash, you can use your debit card to withdraw from an ATM. 

Ways to use a debit card 

When using a debit card, you'll pay with money you already earned and have in your account — no borrowing involved!  

Let’s say you need gas in your car. Just pull up to the pump and insert your debit card! The money you spend on gas will come out of your bank account, reducing its balance. 

After you leave the gas station, you remember that you promised to buy Girl Scout cookies from your neighbor. You stop at the ATM and insert your debit card, which allows you to withdraw cash straight out of your account.

How to use a debit card responsibly

The best way to be responsible with your debit card? Keep an eye on your account balance. Check it daily, or whenever you use the card. You’ll know how much money you have — and be ready to make tradeoff decisions on the fly. 

A debit card uses the money you already have in your bank account. In other words, once the balance is gone you can't use the card. Having a debit card means learning how to use it responsibly. Here’s how you can use it:

• Purchase goods or services: You can pay for things in stores or online with a debit card with money you have in your bank account.

• Withdraw cash: You can visit an ATM to withdraw cash from your account balance.

One of the best ways to use a debit card responsibly is to keep an eye on your account balance. You might do this daily or whenever you use your card — you can decide how often to do it. Checking the balance tells you if you have enough money in there to make a purchase. It also helps you budget, as you'll need to consider your necessary expenditures before using it to buy something. 

Greenlight tip: Checking your account balance is a breeze with Greenlight's debit card and banking app.* 

Looking for a way to teach your kids and teens about money management? Learn more about Greenlight’s debit card and money app. 

Can kids and teens have debit cards?

To get a debit or credit card fully independently, users need to be 18. But with parent help, kids and teens can get checking accounts and debit cards that are right for them. Offering a debit card for kids is one of the ways Greenlight fulfills its primary mission: helping parents raise financially smart kids.

To get a debit card for your kid, you must first sign up for a Greenlight account as a parent. This gives you access to the app and an account. Then, you can order a debit card for your kid or teen to use with the account. 

As the parent, you’re the account owner, so you can keep an eye on the account and control it. You'll have full access to their balances and transactions and can set up their spending categories. You can also use controls to prevent overspending and limit where your kids can spend their money. If you want, you can even automate their allowance and tie it to chores, with flexible payouts that fit your family. 

Kids and teens can get real-world experience by being responsible with their debit cards and managing money wisely. They can use the money skills they learn now to become financially independent in the future. Plus, they’ll learn to spend money after earning it — instead of before. This is one of the best financial habits anyone can learn!

Picture this: Pay your kids an allowance directly to their Greenlight account. You'll help them allocate how to spend the funds. Encourage them to earn money and spend it wisely. You can keep an eye on their account throughout the month and talk to them about their money decisions. Your kids will learn how to check their balance and make tradeoffs when spending money. They can also learn how to avoid splurges and stick to a budget. 

Debit cards help you spend wisely 

Using a debit card helps you avoid borrowing money and limits your spending. As a result, using one helps you and your kids stick to a budget. The result? Wise spending. Smart saving. 

Ready to take on financial literacy at home? Greenlight’s debit card teaches kids and teens how to manage money. The best part is parents can feel confident about it, knowing they can help their kids with these tools! 

*Greenlight is a financial technology company, not a bank. The Greenlight app facilitates banking services through Community Federal Savings Bank (CFSB), Member FDIC.