Can Your Debit Card Act as Your Bank Account?

A woman holding up a blank credit card.

A growing variety of debit cards are offering more possibilities than ever before. As spending is increasingly digitized, they can even act as a bank for people with limited funds who don’t have access to big banking institutions – but still need the convenience that plastic provides. And that’s just the tip of the financial iceberg.

The average person in the U.S. uses debit cards for more transactions than either cash or credit cards. And while credit card usage has gone down slightly, the opposite has happened with debit cards.

The Different Kinds of Debit Cards

If you’re unsure where to start, here are some debit card options:

  • Standard Debit Cards. The average debit card allows you to make purchases at most stores by deducting money directly from a bank account (typically, a checking account). They can be used at an ATM or as cash. When you use your debit card to make a purchase or pay a bill, that money will automatically come out of the account that you set up to link to your card.
  • Prepaid Debit Cards. If you don’t have access to a bank account, prepaid cards are a great alternative. They have become more common as traditional checking accounts become less popular. They work like traditional debit cards, except they are not connected to a checking account. Your cash is stored in a digital prepaid account so your transactions happen electronically. You can easily upload funds at one of many CFSC locations throughout your state.
  • Gift Cards. Though not quite the same, these also involve loading money onto a card and using it to make purchases, at which point the funds are removed from your account. However, you can’t reload a gift card, so they may not be as practical to use as prepaid and standard debit cards.

What Are the Benefits of a Debit Card?

Debit cards can be extremely useful for the average person who could use a bit of convenience and financial literacy in their lives. You don’t need a checking account, and they can act as an alternative check cashing tool when you need it. But before going out and storing all your savings on one, do a little research to find out which option will best serve your needs. Here are the main benefits:

  1. You don’t pay interest rates on purchases.
  2. No bank account is necessary.
  3. No minimum balance is required.
  4. You’re not charged interest, although other fees may apply.
  5. You can use it in other countries – no need to carry cash.
  6. When the card starts to run low on funds, just swing by a CFSC location to load your preferred amount onto the card.

Some consumers use their debit card as a budgeting tool since they generally make it impossible to spend money you don’t have. There’s no lag time before the funds leave your account, so you get a realistic idea of how much you’re spending. No surprise bill at the end of the month!

What a Debit Card Won’t Do

Debit cards do have certain limitations. There’s no way to build credit with a debit card. This means owning one won’t boost your credit score over time and make it easier to take out loans in the future. And you can’t use one to take out a loan to help pay for classes or urgent expenses that you can’t currently afford. On the plus side, they make it difficult to overdraw funds at an ATM or elsewhere. If there are insufficient funds, you simply won’t have access to cash and will be declined if attempting to make a purchase.

Note: Because the funds are immediately available, debit cards don’t always provide the same security as a credit card. You’ll want to be careful and make sure your card doesn’t get into the wrong hands.

Debit Cards through a Bank Account vs Prepaid Debit Cards

Debit cards can be obtained by opening a checking or savings account, either at a bank branch or credit union branch. Prepaid debit cards are usually easier to get and don’t require a clear banking history. Here’s how to activate one:

  1. Come to a CFSC with an ID and social security number.
  2. An assistant will get you approved for a new card.
  3. It gets activated on the spot, allowing you to use it the moment you walk out the door.

Visit CFSC online to find your nearest location and check out all the other ways we can serve your financial needs. Call first if you have questions about hours of operation and which types of ID are accepted.

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