Important debit card benefits explained

What are the important benefits of a debit card?

Debit card benefits include:

  • Low (or no) fees
  • Interest earned
  • Reward programs
  • Accounts
  • Ease of use
  • Payments
  • Security
  • And budgeting assistance

Debit cards can help you save, monitor spending, and receive a long list of rewards through different programs. From low fees to increased security, this article will bring you important debit card benefits explained. 

TFF22-037 - Important debit card benefits explained

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What are the Benefits of a Debit Card?

Debit cards are low to no fee, earn interest, have reward programs, are easy to open and use, cash on hand payments, are secure, and help you to avoid debt.

Let’s take a look at each of the benefits in more detail.

1. Debit Cards Have Low or No Fees

Most debit cards are free to use and come with few, if any, additional fees. Opening a debit card account is free, and plenty of banks now offer no-minimum, no-fee checking accounts that come with a debit card for account holders. These accounts also don’t have a monthly maintenance fee, meaning you can use your account – or not – as much as you’d like.

Some of these options include:

  • Capital One 360 Checking Account
  • Ally Interest Checking Account
  • Discover Cashback Debit Account
  • Alliant Credit Union High-Rate Checking Account
  • Chase College Checking Account

While some debit cards can be charged a fee for using an out-of-network ATM, you can avoid this by using your banking institution or their partner banks’ ATMs for free.

2. Interest Earned – Not Charged

When most of us hear the word interest, we think of paying money out of pocket to a big-name corporation. While this may be the fact for credit card use, debit cards put interest in a positive light. When you use a debit card, you are paid interest instead of the other way around.

Since a debit card is linked to funds in your bank account, most institutions pay you interest to hold your funds. Online and high-interest checking accounts offer up to 1% interest for customers, with some credit unions offering as high as 4% APY.

This interest rate isn’t anything significant, but it’s a few dollars back into your account every month instead of another bill in your mailbox. Compared to the average credit card interest rate, which charges you a whopping 20% or more on balances, choosing a debit card is a no-brainer.

The top interest-paying credit union debit accounts are found at:

  • La Capitol Federal Credit Union: 4.25% APY
  • Consumers Credit Union: 4.09% APY
  • Lake Michigan Credit Union: 3.00% APY

3. Debit Card Reward Programs

Debit cards can be associated with various rewards programs. These give you cashback on daily purchases or allow you to accumulate points that can be traded in for travel, cash, gift cards, and more.

Cash-Back Debit Cards

Cashback debit cards return a percentage of your purchases to your account – it’s like receiving a partial refund on everything you buy! This percentage ranges from 1% to 15%.

Some cards offer a higher cash back percentage on certain purchases, such as groceries, or even through specific retailers.

Some cashback debit card options include the following:

  • Discover Cashback Debit Card
  • Axos Bank CashBack Debit Card
  • Empower Debit Card
  • Bank of America Debit Card
  • Empower Debit Card

Cashback rewards may be limited to a certain amount in spending. Cash-back is usually applied to your account monthly. Some cards allow the cashback to be collected as a virtual or physical gift card.

Travel Debit Cards

Travel debit cards accumulate miles or points that can be exchanged for things like flights, car rentals, or hotel stays. Each card provides a different number of points or miles per dollar spent and works with specific airlines to provide reward travel.

Another bonus to travel-specific debit cards is that they usually don’t have foreign transaction fees, meaning you can use your debit card overseas without worrying about spending more than you planned to.

4. Debit Cards Are Convenient

Cash has never been the safest form of payment, and cashing checks or wiring money have always taken up too much time. Debit cards are a one-and-done payment system. With many backed by chip technology, you can now tap, pay, and go in a matter of seconds.

Debit cards are accepted by millions of vendors worldwide. They are also offered in Visa, MasterCard, and prepaid American Express debit card options. No matter what you’re buying, when, or where, a debit card is likely one of the top accepted payment methods to get you what you need, fast.

5. Opening a Debit Card Account Is Easy

Debit cards are easy to acquire, so long as you meet some basic requirements. Debit cards can be given to any adult or a minor accompanied by their legal guardian.

After choosing which type of debit card you want, you’ll need to apply in person or online. You’ll first present a photo ID to open the account and initiate a deposit. Some banks will require you to provide proof of your current address, such as a recent bill. If available, you’ll also share your email address and create an online banking account. 

Debit cards can be given to you on the spot or mailed to your house. You can usually start using your debit card that same week, accessing your funds through ATMs or immediately during purchases.

Unlike credit cards, which require credit score checks and background information about your finances, debit cards are easily accessible to most Americans.

6. Debit Cards Allow for Immediate Payments

Another benefit of the debit card is its immediate payment function. Your transactions are approved within seconds and reflected on your account almost just as quickly. 

You should see the amount deducted from your account for in-person purchases in as little as 5 minutes. For online purchases, the vendor may take a day or two to pull the funds from your account but is unrelated to your banking institution.

Credit card payments often take days to post on your statement, making it easy to lose track of expenses and fall off track when it comes to budgeting. Debit cards help make money management easy so you can know where every hard-earned dollar goes.

7. Debit Cards Have Extra Security

Carrying cash can be dangerous, and card payment systems have made transactions more accessible and safer. Debit cards use encryption and chip technology and require a private PIN to approve large purchases and ATM transactions.

This PIN is created by the account holder and should never be shared with someone else. This safeguard protects your funds so that they are unreachable even if your card is stolen.

If you do lose your card, many banking apps offer “card freezing” options to render your debit card useless in the hands of any fraudsters.

8. There’s No Debt Accumulation with Debit Cards

The average American held over $5,000 in credit card debt in 2020. While this is a slight decrease from 2019, it is still more than most Americans make in one month’s pay. Unlike credit cards, debit cards do not accumulate debt in your accounts.

Debit cards pull payments directly from the cash you have available. If you go over this amount, you may be charged an overdraft fee by your bank; however, some institutions have a savings-to-checking option that can replenish your debit card funds if they fall below $25.

No matter the case, you won’t be able to use your debit card once you’ve overdrafted your account, which makes it impossible to accumulate debt through this payment source.

Debit Card FAQs

The following are some of the most frequently asked questions about debit cards.

What Rewards Can I Get from My Debit Card?

Debit cards can come attached to a wide variety of reward programs. Most are cashback or travel reward programs. Cashback programs return a certain percentage of your spending into your account. It may also give you back a higher percentage on certain purchases, like groceries or items bought from specific vendors.

On the other hand, you can redeem travel rewards for flights, hotel stays, or even car rentals through affiliated companies.

When Are Purchases Reflected on Debit Card Accounts?

If purchasing in person, it is reflected on your debit account within minutes. This makes it easy to keep track of most of your day-to-day expenses. The vendor determines how long it takes for the money to leave your account for online purchases. Usually, it is done within 1-2 business days.

What Happens If I Overdraft My Debit Account?

Most institutions charge an overdraft fee if you overcharge your debit card. After spending more than you have one time, you will not be able to use your debit card for future purchases until you replenish your account. Some banks offer an automatic savings-to-checking transfer when your checking account drops below a $25 balance. This helps you avoid any overdraft fees and keeps your accounts in check.

Can a Minor Have a Debit Card?

Yes, a minor can have a debit card if their parent or legal guardian signs off on opening the debit card account. There are also prepaid debit cards that can be bought by a minor accompanied by an adult. These debit cards usually have a monitoring option for parents so that the minor can learn how to manage their own money from a young age properly.

What Is Safer to Use – a Debit Card or a Credit Card?

Both debit and credit cards have safeguards to protect against fraud and theft. Unlike credit cards, debit cards require a PIN for larger purchases and ATM use, which the account holder should only know.

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