Debit cards: everything you need to know

While some Australians still rely on cash for everyday purchases, bank cards are a much more common form of payment. There are a number of different types of cards available, including debit cards. But what’s the difference between a debit card and a credit card? And can you use a debit card when shopping online or paying bills?

Explore our comprehensive guide to discover all the answers to these questions and many more.

A debit card is a basic payment card, generally linked to your everyday bank account.

Your debit card is a convenient way to access the funds you’ve got sitting in your transaction account, as opposed to a credit card, in which money is borrowed and can be subject to interest. A debit card uses your own money and typically won’t rack up fees or interest charges.

Check out our guide to discover the differences between debit cards and credit cards.

A debit card is typically linked to an everyday bank transaction account, and draws from the funds available in that account. That means that to use your debit card, you’ll need to have enough money in your account to cover the cost of your purchases - this is not your savings account.

There are a few ways to use a debit card to make a payment:

Using contactless payment methods: More popular than ever, contactless payment methods include Google Pay, Apple Pay, PayPass and Paywave. Simply tap your card or linked device (such as your phone) to complete transactions. Unless the spend value exceeds $100, you generally won’t have to enter your PIN.

Through a retailer's terminal: This method involves inserting your card into an EFTPOS machine in order for it to read the embedded encrypted chip. You’ll likely need to enter your PIN number to confirm the sale.

Providing your card details: Mostly useful for online shopping. Simply enter the card number, expiry date and security code (CVV) to make a payment. Generally, your card must be affiliated with either the Visa or Mastercard network.

Visiting an ATM: If you want cash in your hands, then a debit card is incredibly useful. Instead of having to withdraw money from a bank branch, you can use your debit card to withdraw cash from any ATM. Beware that some banks and institutions may charge additional fees for this service. There are also limits to the amount you can withdraw.

There are several types of debit cards available in Australia, each serving different needs and purposes:

• Standard debit cards: These are linked directly to your bank account and allow you to make purchases and withdraw cash using your own funds. They can typically be used at ATMs and retailers both in Australia and internationally.
• Prepaid debit cards: These cards are preloaded with a specific amount of money and are not linked to a bank account. They are a good option for budgeting or for kids and teens, as they limit spending to the loaded amount. Prepaid cards can often be used for online purchases and at retailers that accept them.
• Business debit cards: Designed for business owners, these cards allow easy access to funds for business expenses directly from a business bank account. They often come with features tailored for managing business finances.
• Student and youth debit cards: Many banks offer debit cards specifically for students or younger users, typically with lower fees and no minimum balance requirements. These accounts often come with parental oversight features to help control the flow of money and ease children into the world of banking.
• Rewards debit cards: Generally, debit cards don’t include rewards benefits. However, some banks do provide rewards for debit purchases, such as cashback or points that can be redeemed for gifts or discounts. These cards often come with specific terms and conditions regarding eligibility and rewards accumulation.
• Prepaid travel cards: These cards are designed for use when travelling overseas, allowing you to withdraw local currency from ATMs and make purchases in foreign currencies, often with lower or no international fees.

Each type of debit card has its own advantages, so it’s important to choose one that aligns with your financial needs and lifestyle.

Using your debit card for online purchases is a convenient and secure option. Most retailer websites and apps accept Visa or Mastercard debit cards, allowing you to shop easily without the need for a credit card. 

When making a purchase, simply enter your card details, including the card number, expiration date, and security code (found on the back of your card). Many banks also offer added security features, like two-factor authentication, to protect your information.

However, it’s important to ensure you’re shopping on secure and reputable websites to safeguard your financial details. Keeping track of your transactions is also a sensible practice, as it can help you manage your spending and promptly detect any unauthorised charges.

As long as you can present a valid form of government-issued identification, and you meet the individual bank’s minimum age requirements, you should be able to apply for a debit card.

Kids can typically apply for a debit card around the age of 14. There may be different age requirements and options for minors, so it’s best to check with your bank for its specific policies. Usually, parents or guardians can open accounts in a trust on behalf of their children by providing supporting documents, such as a birth certificate.

Some banks will offer debit cards with parental controls accessible to parents and guardians. This can be helpful when monitoring spending and teaching children how to use their cards safely and appropriately.

Most debit cards won't attract monthly bank account fees or interest charges as you're spending money from your own linked account and not borrowing credit. However, it’s important to ensure that your linked account doesn’t become overdrawn or you may incur overdraft penalty fees.

When withdrawing money at an ATM, you may be charged a fee if you use a non-affiliated bank’s machine. Additionally, some banks only allow customers a limited number of fee-free ATM withdrawals per month. When travelling abroad, you may also be subjected to exorbitant ATM charges, international transaction costs and currency conversion fees.

Australian retailers are charged merchant card processing fees, which they often pass on to consumers in the form of EFTPOS, Visa and Mastercard surcharges at the point of sale. It’s important to check the total price before paying, during both in-person and online transactions.

Most Australian debit cards are affiliated with either the Mastercard or Visa networks, allowing you to access your funds almost anywhere globally and ensuring that they’ll be accepted internationally too.

Keep in mind that international transaction and currency conversion fees may apply when using your card for purchases or withdrawing cash from ATMs abroad.

Your bank or provider may require you to inform them of which countries you’ll be travelling to, and when, before you depart. This is a security measure that can prevent your card from being blocked and unuseable.

Prepaid travel cards function similarly to debit cards, making it easy to transact during your overseas trips without the hassle of carrying cash. However, these cards are specifically tailored for international use, allowing you to load and spend funds in the local currency of your travel destinations, avoiding potentially costly conversion fees.

The main difference between debit and credit cards comes down to where the money is coming from. A debit card pulls directly from your bank account, using your own funds, while a credit card taps into a line of credit issued by your bank, which means you’re borrowing money that you’ll need to pay back later.

Credit cards can come with late fees and hefty interest charges if you don’t pay off your balance by the due date. Plus, they often have extra features that your debit card won’t offer. For example, some rewards credit cards let you rack up frequent flyer points, provide travel insurance coverage, and might also charge an annual fee.

If you’re someone who tends to spend beyond your means or struggles with budgeting, a debit card might be a safer option as they can help you to maintain a transparent budget, as you’re limited to spending the funds available in your account. Conversely, if you’re disciplined about managing your finances and can pay off your credit card balance in full each month, a credit card could offer valuable rewards and benefits.