What Is A Debit Card and How Does It Work?

Posted by ArjitChalmela on January 15th, 2020

Plastic money has become an indispensable part of our wallets these days. Using these has become common and convenient that there is no need to carry cash in our wallets. There are two cards that are referred to as plastic money – credit and debit cards.

One of the first things you get when you open a bank account is a debit card. This card is extremely important. It is essential to learn what is debit card and how it works.


It is a card that is connected to the bank account. It is also called an ATM card. This card can be used as an ATM card to withdraw funds from the bank account. It can also be used like a credit card for online transactions and swiped across merchant outlets. However, unlike a credit card, the debit card reduces your account balance whenever used.

The main distinguishing feature of the card is that whenever used, it directly debits the bank account linked to it. For example, if you withdraw Rs. 20,000 using your debit cum ATM card, then your savings or current account balance reduces by Rs. 20,000.

A debit card eliminates the need to carry physical cash because it can get directly swiped. It can be used to make payments on merchant websites or for online shopping as well. If you have balance in the bank, the card can be swiped and used to honour transactions.

In India, debit cards are issued by Visa, MasterCard or RuPay. These are merchants that settle these transactions. The card may incur charges for online transactions especially internationally. It is better to understand the charges when you open a bank account since they can add up after a period. It also comes with an expiry like a credit card. This means once the card expires, it cannot be used, and you will have to request the bank for a new one.

How do debit cards work?

Since you have understood the debit card meaning, learn how it works. They can be swiped at merchants using their point of sale machines. RBI regulations on cards have replaced magnetic stripe cards with chip-based cards which require PIN verification. This means once they get swiped, you need to enter a PIN. Once the authenticated, the transaction takes place and funds get debited. Earlier, all information got stored in the magnetic stripe. However, now it gets stored in the chip.

In case of an online transaction, you need to enter the card number, your name as it appears on the card, and the CVV number. The Card Verification Value or CVV number is a three-digit number behind the card that provides additional verification. However, most online portals need a One Time Password or a PIN verification when used. Once this additional authentication is provided, the funds get debited from the account and the transaction goes through. In case i fails for any reason and the funds are get debited, you need to approach your bank who then reverse the transaction once you submit the application and relevant supporting proof.

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