A debit card allows you to spend money from your bank account without needing to withdraw cash. Unlike a credit card, it is linked to a transaction account that contains your funds—be it a little or a lot. This means when you use your debit card, you are spending money you already have—rather than borrowing money, or ‘credit’, from your financial institution.
This guide looks at how debit cards work, including whom they may suit best, and how they compare to credit cards.
Debit Card: What Is It And Do I Need One?
If you open a transaction account at a bank, you will likely be issued with a debit card connected to the transaction account. This means you can spend money on the go, anywhere that debit cards are accepted.
In today’s increasingly cashless world, debit cards are accepted nearly everywhere. It is unusual for a store, restaurant or retailer—especially post-Covid—to only accept cash.
However, prior to debit cards coming into circulation in Australia in the early ’80s, customers would need to go to their bank and withdraw cash directly from an account using a withdrawal slip.
These days, debit cards have become such a normality that they can even be incorporated into mobile wallets on our smartphones, helping consumers access their money at all times—even when overseas.
Whether or not you need a physical debit card comes down to how you like to spend and manage your money. Some Australians may choose to have only a credit card, that they can then pay off directly from a bank account that isn’t linked to a debit card. Others may prefer to only use cash—however, as stated, this is a lot more difficult in our post-Covid world.
Ultimately, debit cards can help you manage your money efficiently as you are only able to spend the money available in your account and therefore don’t have the risk of falling into credit card debt. Usually, you can also see your funds online or via an app, which also helps visualise your spending clearly and make for better budgeting.
Related: Our Pick Of The Best Debit Cards For Australians
What Age Can You Get a Debit Card?
Commonly, the age at which you are eligible for a debit card in Australia is 14 years old. However, the age that you can open a transaction account with a linked debit card depends on the bank.
Using the big four banks as an example, 14 years is the minimum age requirement for debit cards for both Commonwealth Bank and NAB. At ANZ, this age requirement is lowered slightly to 12 years old.Westpac, on the other hand, offers everyday bank accounts and debit cards to children as young as eight. However, for those aged under 14, a signatory will need to open and operate the Westpac account on the child’s behalf.
Some banks also offer a version of a debit card widely known as an Eftpos card, an ATM card, or, at Commbank for example, a ‘Keycard’. These are cards targeted towards the younger generation, with the key difference between a keycard and debit card being that a keycard cannot be used for online purchases. Therefore, parents and guardians can ensure their children have access to pay for things by themselves, but not to spend online.
Wealth creator and founder of The Investor’s Way, Andrew Woodward, believes that these banking products are a positive trend.
“By providing kids with access to defined amounts of [money] and teaching them that once it is gone there is no more until their next pay cycle or pocket money payment will teach them how to manage their [finances],” he told Forbes Advisor Australia.
“These are skills that are invaluable, and sadly lacking in modern society.”
Can a Debit Card Be Used Online?
Yes. A debit card can be used online to make purchases. As explained above, there are another version of cards that can be only be used for physical transactions and ATM withdrawals, but that is not the case with a debit card.
Ultimately, debit card work in the same way as credit cards when shopping online. You will need to enter your details, including your name, card number, card expiry and CVV.
Do Debit Cards Charge Fees?
Usually a debit card won’t charge any monthly account keeping fees, but some still do—so make sure you are aware of any potential fees that might come with your account.
On Forbes Advisor Australia’s list of our top picks for best debit cards, two cards charged a monthly fee: the Commonwealth Bank Everyday Account Smart Access and the Westpac Choice Transaction Account. However, both cards had the same provisions to wave the monthly fee if you are under 30 years of age or deposit a minimum of $2,000 a month into your account.
Monthly fees aren’t the only charges to be wary of. Some financial institutions may charge you for transactions such as internet banking, ATM withdrawals, or overdraft fees.
Considering how you spend your money can help you evaluate the type of debit card that would best suit your needs, without eating into your bank balance.
Debit Card Numbers Explained
A debit card will come with lots of different numbers, which can be confusing for first-time users. This is a breakdown of what they each mean:
- Debit card number: Your debit card number is a 16-digit number that is usually on the front of the card. This is not your bank account number, but the card number you would use when shopping online or making transactions over the phone. It is also a way for your bank to verify your identity.
- Expiry date: A card will list its expiration date (again, usually on the front) to specify when the card will expire. Most banks will automatically re-send a new card to cardholders before this date, but it’s important to be aware of it regardless.
- CVV: A CVV, which is the ‘card verification value’, is often printed on the back of your debit card near the signature panel. This is a three-digit code that you will need to enter when shopping online, and is an extra security measure designed to keep your debit card protected from theft.
Debit Cards vs Credit Cards
Debit cards and credit cards can look almost identical, and are used in a very similar manner—but they differ in a crucial way. With a credit card, you are taking out a loan from your financial institution, which needs to be repaid in a specified period of time, or you will be subject to interest charges, often as high as 20% or more.
Woodward tells Forbes Advisor Australia that the “single most important recommendation” he makes to his clients is to “cut up credit cards and only use debit cards”.
“With the statistics that less than 5% of Australians retire with enough money or assets to support themselves in retirement, we can trace this unfortunate number to our reliance on credit and the ‘need it now’ mentality,” he explains.
“It may take some time to transition away from credit, however, the longer you are using other people’s money, the further away from financial security you will be.”
However, for some Australians, a credit card may still be the best option—especially considering some of the credit cards offer perks on offer, such as travel rewards and the ability to earn points. The trick is to know your own spending habits and whether you will be able to pay off the credit card balance in full each month. It’s important to consider your financial needs and capabilities before making a decision on what type of card would suit you best.
Related: Our Pick Of The Best Credit Cards For Australians In 2024
Frequently Asked Questions (FAQs)
Is a debit card or credit card better?
Whether or not a debit card or credit card is the better choice for you is up to an individual. However, Andrew Woodward, wealth creator and Founder of The Investor’s Way, told Forbes Advisor Australia his number-one piece of advice for his clients is to get rid of their credit cards.
This is because credit cards incur interest if not repaid on time. Debit cards, on the other hand, only allow you to access funds you already have available in your bank account. This means you susbtantially lessen the risk of falling into debt.
Related: How To Crush Your Credit Card Debt
What’s the youngest age you can get a debit card?
While most financial institutions in Australia require a child to be at least 12 to 14 years before being able to apply for a debit card, there are some exceptions. For example, Westpac offers debit cards to children as young as eight. In order for the account to be opened, however, a signatory will be required on the child’s behalf. Once the child is 14 years or older, they can choose to remove said signatory from their accounts.
Can you earn interest on a debit card?
As a debit card is linked to a bank account, there is the ability to earn interest on your balance depending on which bank and card you are using. For standard transaction accounts, an interest rate on your monthly balance may be quite low. Conversely, for high-interest savings accounts linked to debit cards, you may be able to reap the rewards if you meet all the monthly criteria.
