In the 1980s banks began to issue ATM (automated teller machine) cards to customers. These cards enabled customers to withdraw money directly from their account at ATM machines. Over time banks wanted to offer customers more features with the same ATM card, like the ability to make purchases directly linked to a specified account. Thus the creation of the debit card. The best way to think about debit cards is to consider them as a combination ATM card and checkbook.

Debit cards are linked to a specific account – typically they are linked to your checking account, but you should talk with your bank to verify which account the card will be linked to. When you make a purchase with a debit card it automatically deducts that amount from the account linked to the card, in the same way that when a check is cashed the amount is immediately deducted from your account. So, for example, if you purchase $89 worth of groceries from the supermarket and put it on your debt card it will show up as an $89 POS (point of sale) transaction or withdrawal from your account. Debit cards are unlike credit cards because they have a fixed limit (your bank account balance) and, because you’re using your own money and not borrowing from a credit company, you don’t have to pay interest when using a debit card the way you do if you charge something on a credit card and carry a balance. You can also withdraw money directly out of your own account when you use a debit card and the funds are automatically deducted from that balance.