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.
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 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
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
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
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
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.
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.
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
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
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: 11 Oct 2018