Using your own money
A debit card offers all the convenience of making payments with
a card, minus 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 have to pay back later.
The most common type of debit card is an ATM (automated teller
machine) or EFTPOS card. The card is used to withdraw
money at ATMs and make purchases. You have to provide a personal
identification number (PIN) before you can withdraw money or make a
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.
Some merchants may offer you 'cashback' or 'cashout' facilities,
where you can withdraw cash along with your debit card
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
Case study: Christina restrains her inner shopaholic
Christina can't resist a good bargain so it is all
too easy for her to run up debts on her credit cards. After she
pays off her last credit card bill, she decides 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 purpose cards (credit and
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 purpose 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 can either tap
or wave your card over the payment terminal (if you have a
contactless card) or you can insert your card into the EFTPOS
machine and select 'CR'.
If you use your card on a contactless terminal (PayPass or
payWave) you will always be paying by credit. Find out more about
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.
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
PIN only debit cards
From 1 August 2014 you will not be allowed to sign for debit card and credit card purchases
when you are buying a product at a point of sale. You'll need to
enter your PIN to authorise the transaction.
This change will only affect 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).
This change won't impact online shopping, telephone purchases or
card transactions such as Visa's payWave and MasterCard's
PayPass where you wave your card or tap and go.
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.
What you need to do
If you don't have a PIN or have forgotten it, contact your bank
or card issuer to organise a PIN before 1 August 2014. You'll need
a PIN that's difficult to guess and not associated with any known
information about you such as an anniversary.
If you think you'll have difficulty remembering a PIN, contact
your card issuer to discuss your options.
If you have questions about the security of this new method of
transaction, speak to your card issuer.
See unauthorised and
mistaken transactions if you have purchases on your card that
you cannot account for.
Ask for a chargeback as soon as you realise something has gone
wrong as there are time limits.
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 has been processed more than
A chargeback is where you make a request to 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
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.
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.
Where a payment method attracting the surcharge is compulsory
the retailer must clearly list the surcharge alongside the price.
Where the surcharge is optional the retailer must clearly inform
you of the surcharge and another way you can pay that avoids the
Ban on excessive surcharge fees
From 1 September 2016 large businesses will be banned from
charging excessive payment surcharge fees on
debit, credit and prepaid card transactions. This
means a business cannot charge a customer more than what it
actually costs them to process a payment. These rules will apply
to other businesses from 1 September 2017.
For more information see credit, debt and prepaid card surcharges
on the ACCC's website.
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
Last updated: 08 Mar 2017