17 Advantages and Disadvantages of Using a Debit Card

The Bank of Delaware receives credit for pioneering the idea of using a debit card to access the money in your checking account. Customers may have been using this resource to complete purchases as far back as 1966. By the 1970s, most institutions were either using them on a full-time basis or engaged in a trial program with their account holders.

As more ATMs began to appear across the United States and around the world in the 1980s, debit cards became extremely popular. Over 300 million transactions using this resource occurred in 1990. Over $40 billion in purchases now takes place with this banking tool each year.

Merchants pay a small fee for the privilege of taking a debit card transaction, and the average amount of that cost is $0.44. Those fees add up to about $20 billion in revenues for the companies that process the transactions.

If you are thinking about obtaining a debit card to access your account at a bank or credit union, then these are the advantages and disadvantages that you will want to consider.

List of the Advantages of Debit Cards

1. Debit cards can help you to avoid debt.
A debit card directly links to your checking account. When you use one to complete a transaction, then the money gets immediately taken out. That means you won’t go into debt when making a purchase because the transaction is treated much like one that would use cash. Your spending is limited to what is available in your account at the time of purchase. If you don’t have enough money to complete a transaction, then the payment processor will reject the request.

Because you are using money from your account in a real-time scenario, there won’t be any interest charges to worry about each month.

2. Most institutions allow you to carry a debit card without any fees.
Although Wells Fargo tried a program that charged three dollars per month for debit card access privileges in the recent past, most institutions allow you to use this resource for free. Several banks and credit unions do not charge an annual fee, which is standard practice with a credit card account. Most institutions offer free checking accounts with no maintenance fees as an added benefit. You might even be able to use your debit card at an ATM without paying a fee to get cash or access your balance.

3. Debit cards work well for most small purchases.
Each merchant pays a small fee to process your payment when you use a debit card. Although this amount used to be smaller than running a credit card transaction, many payment processors are now charging the same amount for each swipe of the card. That means you can make small purchases without worrying about how much cash you are carrying since you have direct access to your checking account. If you need money from your savings account, then you can visit an ATM to withdraw the specific amount of cash that you require.

Some merchants have permission to charge their swipe fee as part of your transaction, but they must post this information at the register or in a highly visible location. You might see a minimum transaction request as well.

4. It is very easy to get a debit card for your account today.
If you opened a checking account 40 years ago, then obtaining a debit card would not be as easy as it is today. Even if you have poor credit or haven’t established a credit history yet, you can still gain access to this purchasing tool if you have a valid checking account at most financial institutions. You do not need to apply for it separately as you do with a credit card account. That means your finances are straightforward because you can always see what the updated balance is in your checking account.

5. You can run a debit card as a credit transaction.
Debit cards might pull money directly from your checking account, but you can still complete a transaction as if it were a credit card with this tool. When you choose this option, then there is no longer a requirement to enter your personal identification number (PIN) to pay for your purchase. The merchant will provide you with a receipt to sign, which then they should compare to the back of your card to verify your identity.

Even with chip technologies in place and purchasing thresholds limiting signatures, this advantage lets you use your debit card almost anywhere in the world.

6. Debit cards put you into a position where budgeting becomes necessary.
When you start using a debit card, then it is much easier to stay within a budget. You must use money that is in your checking account to complete a transaction. If you need to tap into your savings, then you must take cash out from an ATM. Assuming that you don’t have an overdraft protection feature on your account, then you won’t be going into any debt because nothing happens when you have no money. That means smart shopping habits can help you to avoid most fees.

7. Reward programs come with many debit cards today.
Debit cards come with a reward feature today at most institutions. One of the most popular options is to receive some money back with each transaction since your bank or credit union gets a piece of the transaction fee from the merchant. Most accounts provide you with 1% back or less, but it is still free money that you normally wouldn’t receive.

Several stores, restaurants, and name brands work with banks and credit unions to provide specific rewards for consumer shopping habits. You might receive 5% back on a Starbucks transaction or save a certain amount per gallon of fuel. Although you must sign up to receive these benefits, the return can be surprisingly high.

8. You can dispute any charges that seem suspicious.
If you see a debit card charge in your checking account register that seems unfamiliar, then you have the right to verify or dispute it. That means there are some protections in place for you if your card gets stolen or lost for any reason. When an item doesn’t get delivered as promised or is found to be defective, you can also work with your bank or credit union to manage the transaction in question.

Most stores will refund your money directly if you have a return. The only issue here is that you have a limited time to file a dispute before the expense becomes your responsibility.

9. Debit cards can be used online or offline for remote transactions.
If you are shopping on Amazon for goods or groceries, then a debit card can help you to complete a transaction. You don’t need to be present at a physical location to use this financial tool. As long as the merchant has access to the number on the front of your card, the expiration date, and the security code on the front or back, then you can complete a purchase remotely.

This advantage also applies to offline invoices that you want to pay for with your debit card. If you receive a medical bill in the mail, then you can fill out your debit card information and mail it back as a form of payment. If you want a more secure option, then you can relay your payment data over the phone.

List of the Disadvantages of Debit Cards

1. You might not be able to use the debit card to complete a transaction.
Debit cards will only work when you have money in the account to complete the transaction. If there aren’t enough funds available, then the payment processor for the merchant will reject the request for purchase. Having this issue happen can be an embarrassing situation.

If your account includes overdraft protection as a feature, then the bank or credit union will still pay for your purchase even though there isn’t enough money available. This option carries a substantial fee, so it should only be used occasionally and with great care.

2. There can be several fees associated with your debit card activities.
If you use a debit card outside of your financial institution’s ATM network, then you will likely pay a small fee to access the money in your checking or savings account. Some machines will charge a fee if you request to see your balance add an ATM. Your bank or credit union might charge maintenance fees if you don’t qualify for a waiver according to the terms and conditions of your account.

There can be situations where your institution might charge an insufficient funds fee when using a debit card. It isn’t as likely as when you write a check that bounces for some reason, but it is still a disadvantage to consider.

3. Debit cards can cause complications for significant transactions.
If you need to make a large purchase for a big-ticket item, such as an automobile or a furniture item, then a debit card can make your situation somewhat complicated. Some banks and credit unions place a cap on the amount that you can spend with this tool in a 24-hour period. If the item you want to purchase exceeds that amount, then you must receive prior permission from your financial institution to complete the transaction. If you do not, then the payment processor will reject the request.

You also have the issue of immediate cash withdrawal when making a significant purchase. All of the money gets taken out of your checking account immediately. If you were to use a credit card instead, then the transaction would be treated as a loan. That means you don’t need to pay back what you borrowed right away.

4. If you forget your PIN, then you might not have the option to complete a transaction.
Some institutions will not allow you to complete a transaction with your debit card unless you enter your personal identification number. If you have forgotten it for any reason, then it may not be possible to finish your purchase. That means spending can be a little less convenient since you need to maintain some awareness of your code.

If you do remember your PIN, then you must safeguard it as you would any other password. Entering the numbers in public with people watching you can create the potential for theft since most merchants don’t verify a person’s identity when completing a transaction.

5. Using a debit card won’t improve your credit score.
Debit card transactions are not a form of credit. That means your consistent use of this financial tool will not improve your credit score. If you want to establish a repayment history to boost your numbers for future purchases, then a loan or a credit card are the primary options that are available to you. That means you don’t run the risk of lowering your credit score either – unless you have a negative balance in your account.

Your credit score can still take a hit if you have overdraft fees on your checking account that creates a negative balance at your bank or credit union. This amount gets reported to the three major credit bureaus in the United States and others around the world as another debt that you’re carrying. This issue can make it more difficult to find a new apartment or job until you restore your account to a positive balance.

6. Debit card rewards are often limited in size and availability.
Debit cards will offer some cashback incentives, but most accounts will not provide a formal rewards program for you to use. That means you won’t earn miles or points toward specific merchandise when completing transactions. Some accounts do offer travel insurance and similar benefits, but the amount that you earned through these loyalty programs is usually significantly less than what a credit card provides.

Every bank and credit union operate a little differently with their terms and conditions for using a debit card, so you will need to speak with your local institution to see if this disadvantage applies.

7. It can make you spend more on goods or services then intended.
People tend to spend less money when they pay with cash to complete a transaction. When you use a debit card, then this financial tool spends like having money in your hand, but it feels more like a credit card because there isn’t something tangible available that you can see.

If you make frequent small purchases with your debit card, then those amounts can add up quickly. Many people find that they are more careless about their spending when using this resource instead of paying with a fiat currency.

8. Holds on your account will take money access away from you.
If you use a debit card for a hotel room, car rental, or fuel purchase, then a hold for incidental costs might be placed on your account. This amount is held in reserve in case the costs are higher than anticipated for your activities. Even if you don’t spend anything extra, it can take up to 10 business days before access to your money gets restored. If your cash is tied up while on vacation, then you could find yourself in an uncomfortable situation.

Holds on your checking account funds will also lower your balance to trigger overdraft protection if you have this feature.


Debit cards can be an invaluable asset when you need to pay for goods and services without having cash available. It is a financial tool that is easy to obtain and simple to use. Because the funds come directly from a linked checking account, you don’t need to worry about going into debt – unless you have overdraft protection in place and struggle to control personal spending habits.

Almost every merchant today will accept a debit card because it is such a popular tool. If you are at a cash-only business, then a visit to an ATM will be necessary. That’s why most consumers find that having a credit card and some cash available with a debit card is the best combination for spending.

The advantages and disadvantages of debit cards generally fall in the favor of this financial tool being useful for the average person and family. Although you must manage your money wisely to avoid future problems, it is a convenient tool that is much easier to use than writing a check.

Blog Post Author Credentials
Louise Gaille is the author of this post. She received her B.A. in Economics from the University of Washington. In addition to being a seasoned writer, Louise has almost a decade of experience in Banking and Finance. If you have any suggestions on how to make this post better, then go here to contact our team.