Debit cards

Using your own money

A debit card offers all the convenience of making payments with a card, without the pain of credit debts. But there are still things to watch out for.

How debit cards work

When you use a debit card, it takes money from your account to pay for purchases. If there is no money in your account, you can't make the purchase.

In other words, a debit card uses money you have, while a credit card uses money you don't have. Using debit cards helps you avoid running up a debt you'll have to pay back later.

The most common type of debit card is an ATM (automated teller machine) or EFTPOS card. This card is used to withdraw money at ATMs and make purchases. You may have to provide a personal identification number (PIN) before you can withdraw money or make a purchase.

Debit cards are called different names depending on who issues the card. To find out more, ask your financial institution what kind of debit card it offers.

Cash withdrawal

Some merchants may offer you 'cashback' or 'cashout' facilities, where you can withdraw cash along with your debit card purchase.

Some debit cards also provide a guarantee for internet transactions. You won't be charged for unauthorised or fraudulent transactions if you report them to the bank within a certain time.

Case study: Christina restrains her inner shopaholic

Happy young woman after paying off credit cards and switching to debitChristina can't resist a good bargain so it is all too easy for her to run up debts on her credit cards. After she paid off her last credit card bill, she decided to cancel her credit cards and get a debit card. Now, she can only buy things if she has enough money in her account.

'This means I have to be conscious of what I am spending. It's a great way to keep me from living beyond my means!'

Dual network cards (credit and debit)

Some debit cards can also be used as credit cards but may charge high interest if you use them this way. If you are considering switching from a credit card to a debit card to avoid debt, make sure your debit card does not offer a credit facility.

If you want to use a dual network card to pay by debit you should insert your card into the EFTPOS machine at the checkout and select 'SAV' or 'CHQ'.

If you want to pay by credit, you should insert your card into the EFTPOS machine and select 'CR'.

Some debit card accounts allow you to establish a line of credit, where you can overdraw your account up to a specified limit. However, the overdraw fees can be very high. You could end up paying more to use your debit card as a credit card, than you would on a regular credit card.

Contactless payments using dual network cards

Most debit cards allow you to make a payment using more than one payment network. Contactless payments with a debit card can be made using either Visa or Mastercard or through EFTPOS.

Using your debit card online or overseas

Be careful when using a debit card overseas or for shopping on the internet. Unlike credit card fraud, any amount stolen comes directly from your own funds and it may take some time to get the money back into your account.

Find out more about protecting your card when you are shopping online.

PIN only debit cards

You can no longer sign for debit card and credit card purchases when you buy a product at a point of sale in Australia. You need to enter your PIN to authorise the transaction, or tap or wave your card if you want to make a contactless transaction.

This only applies to transactions where you're physically present at the point of sale and if the card you're using has an embedded smart chip. You'll continue to sign when using chip-less cards with a magnetic strip at the back (for example some pre-paid cards and gift cards).

It doesn't apply to online shopping or telephone purchases.

Overseas use of your card

Be aware that your PIN might not work when you use your credit card overseas. Depending on the overseas merchant, you may still need to use a signature to authorise purchases.

Problems with your debit card PIN

If you don't have a PIN or have forgotten it, contact your bank or card issuer to organise a new one. Your PIN should be difficult to guess and not associated with any known information about you, such as a birthday or an anniversary.

If you have difficulty remembering a PIN, contact your card issuer to discuss your options.

If you have questions about the security using a PIN, speak to your card issuer.

See unauthorised and mistaken transactions if you have purchases on your card that you cannot account for.

Chargebacks on debit cards

You may have chargeback rights when you make a purchase using a debit card and something goes wrong, such as not receiving the goods or the same transaction being processed more than once.

Smart tip

Ask for a chargeback as soon as you realise something has gone wrong as there are time limits.

A chargeback is where you ask your bank or card company to get the money back from the merchant or shop. To find out when and how to request a chargeback, see the terms and conditions of your debit card or contact your bank or card issuer.

There are some circumstances when chargebacks may not be available, such as when you make a BPAY payment.

Debit card fees and charges

Most accounts offer a number of free electronic transactions per month, and then charge you for any excess transactions. Fees will usually vary depending on whether it is an online, ATM, EFTPOS or branch transaction. Check what fees apply for different types of debit card transactions.

Merchant surcharges

Debit card purchases can attract a surcharge that some retailers will pass on to you. You must be adequately informed of any surcharge before you pay.

If it is compulsory to use a payment method that attracts the surcharge, the retailer must clearly list the surcharge alongside the price. If the surcharge is optional, the retailer must clearly inform you of the surcharge and another way you can pay that avoids the charge.

Ban on excessive surcharge fees

Businesses are banned from charging excessive payment surcharge fees on debit, credit and prepaid card transactions. This means a business cannot charge you more than what it actually costs them to process a payment.

See the ACCC's website for more information on credit, debt and prepaid card surcharges.

If you typically make a lot of non-cash transactions, debit cards are worth a look. If a credit facility comes with the card, see if you can close it to avoid building up debt.

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Last updated: 11 Oct 2018