Debit Cards

Simplifying your finances by only spending within your boundaries.

Compare best debit card offers in Australia

Debit cards are amongst the most popular methods of payment for people living in Australia. They’re simple and easy to use, which is a large part of their appeal for users. If you’re looking to take one out for your everyday payments and transaction management, you should look no further than this comprehensive guide. Find out about how they work, how you should use them and the ways in which you should compare the best debit cards here.

How do debit cards work?

Debit cards are amongst the simplest forms of payment you can use. Essentially, these function as a method of access to your transaction account with your bank or credit union. They bring an overall sense of convenience to your finances and payments, as they’re easy to use and understand.

You can use debit cards to pay for goods and services in the same way as a credit card, either by tapping on the EFTPOS machine or inserting or swiping your card and typing in your pin. You may also have access to a digital wallet, which can allow users to use their phone as a makeshift card.

Alternatively, debit cards can be used at ATMs to withdraw cash from your account. It’s important to note, though, that you may be charged a fee if you withdraw from another company’s ATM instead of your own, although this depends on your bank or credit union and the debit card you’ve taken out.

In what ways are debit cards different to credit cards?

Debit and credit cards differ in several key areas. Take a look at the main points of comparison you should make if you’re deciding between applying for a debit or credit card.

Use of funds Risk of debt Fees Credit history Ease of application
Debit card
Restricted to the use of funds held in your transaction account
Minimal to non-existent; only really possible with an overdraft feature
Sometimes monthly maintenance fees apply, while some businesses and ATMs will add a surcharge to your purchases
Has no impact on credit score
Simple; your financial institution doesn’t have to worry about their funds being spent, so the process is much quicker
Credit card
Restricted to the use of provider’s funds up to a pre-determined limit, after which they must be repaid
Greater; as funds spent don’t belong to the card owner and must be repaid with interest, you’ll end up paying more for what you buy
Annual fees, cash advance fees and high interest rates all apply, along with an increased surcharge compared to debit cards
Will positively or adversely affect your credit score depending on how well you manage your repayments
More complicated; several factors will be taken into account in the application process, as you must be proven to be a reliable customer before being granted your card

Use of funds

Firstly, and perhaps most importantly, credit cards allow you to spend funds that you may not have in your linked account, whereas debit cards do not. All of this means that, with a debit card, you can only ever spend the money you have in your account. This is a bonus for those who want help with budgeting and staying within their financial means. This may result in you not being able to make a larger purchase should the funds not be available in your transaction account, which credit cards facilitate, but it encourages those who use debit cards to save more and improve their financial health.

Risk of debt

There is zero risk of debt accruing on a debit card. They simply serve as a vessel to solely use funds belonging to their cardholder through the VISA or Mastercard systems, meaning that there is no risk of debt on a debit card. Because credit cards are essentially small, high interest loans granted whenever you make purchases, there is an onus on you to repay them as soon as possible before being hit with significant additional costs. If that isn’t done, though, you run a serious risk of letting credit debts add up over time and become more difficult to surmount.

Fees

In terms of fees on each card, debit cards are much kinder on your account. You may have to pay a service fee each month to maintain your account, and occasionally pay a surcharge at some businesses and ATMs, but that amounts to a minimal fee spend each year. Credit cards are a different story; interest rates are incredibly high for credit card repayments, sometimes stretching upwards of 20%, while annual maintenance and cash advance fees can also stack up. Credit cards are likely to have the same surcharges that debit cards have when it comes to spending in certain places, but this can be more than doubled or tripled the amount depending on your card.

Effect on credit history

Debit cards don’t affect your credit history, so this can be seen as a positive or negative depending on how you’re able to manage your credit card debts. Those who pay theirs off promptly and regularly can have their credit score boosted by using a credit card, which can help with obtaining finance in other areas.

Ease of application

Also, debit cards are generally much easier to receive, as most providers will offer you a debit card upon your account sign-up. The process is more complicated for credit cards, as your previous borrowing and financial history, income and employment status are all taken into account during the application process. At the end of all this, you may not even be approved for your chosen credit card.

How can I compare the best debit cards?

You’ll find that there are multiple key comparison points when it comes to comparing between the best debit card deals. You should always keep these in mind when shopping around for the right debit card.

Fees

Even though there are far fewer and impactful fees on a debit card when compared to a credit card, you should still be aware of what your bank or credit union is charging you for holding your debit card. The easiest of these fees to compare is the monthly maintenance fee, which you’ll often find is $0. This may be under certain conditions such as depositing a certain amount of money per month, which can range up to several thousand dollars. Some debit cards may have certain other fees waived, including withdrawal fees, overdrawn fees and foreign currency fees, so these are worth considering too.

Rewards

Because of the rising prevalence of debit cards, many rewards programs initially associated with credit cards have begun to migrate over. One of the most common of these is cashback on purchases, which will provide you with additional money into your account under certain circumstances. Rewards can also include discounts to be applied to your purchases, such as special offers on products like home entertainment, frequent flyer points and more. If you always have your eye on great deals, check with your financial institution to see what their rewards program looks like.

Purchase protection insurance

Purchase protection insurance is a type of insurance that covers you against accidental damage or loss due to theft of eligible items that you’ve bought with your debit card. This insurance can often come in-built with your debit card, or it can be sought out separately. If this is something that you value and believe would be an important source of cover for your items, look for debit card providers who provide this service either automatically or at a cheaper rate.

Access to your account

Financial institutions will have differing levels of access when it comes to how easily their customers will be able to gain access to their transaction bank accounts. This can be through physical ATMs or providing online services that allow users to keep track of their debit card via website or app. This is a relevant consideration for debit card users, as a card without easy access to its account isn’t hugely convenient. If you like to carry cash around, you might favour a debit card with a bank or credit union with a greater number of ATMs.

The pros and cons of debit cards

Take a look at some of the positive and negative aspects of debit cards if you’re still weighing up your options

PROS

Simple and easy to use

Debit cards act as a basic but effective line between your transaction account and your purchases, with very few bells and whistles

Avoid taking on any debt

Unlike credit cards, there is no risk of debt associated with debit cards, meaning you can spend your money safe in the knowledge that you won’t be buying beyond your means

Cheaper to run

Because the card is more simple to run overall, you’ll find that there are far fewer fees to incur on a debit card when compared to a credit card

CONS

Limited by the funds in your account

You won’t be able to make larger purchases to repay on your debit card; if you don’t have the funds, or an overdraft feature, you won’t be able to buy it

Won’t help your credit score

Even if you’re exceptionally responsible with your finances on a debit card, you won’t have much to show for it when it comes to trying to find financing in other areas of your life

Daily limits

You may find that your debit card imposes a daily limit on what you can spend, so more substantial purchases may not be possible even if you have the financial means to do so

Frequently asked debit card questions

Still have some queries about debit cards? Here are some of the most common that others ask

What are prepaid cards and how are they different to debit cards?

Prepaid debit cards function in a very similar way to regular debit cards, with the key difference being that they’re supported by a pre-loaded amount of money that can be topped up over time rather than being linked to your transaction account. Prepaid debit cards will generally also have mandatory minimum and maximum amounts that can be held at any given time.

How do debit cards work for kids?

Debit cards work in a similar way for kids as they do for adults, with a few key differences. Parents are given overall control over the account, giving them the power to implement spending restrictions and disable the card from use where they see fit. These cards are generally not as common as regular debit cards, so you may have to go looking to find the right one for your family.

What can I use a debit card for?

Debit cards are an incredibly versatile method of payment and can be used across a variety of contexts to great effect. The most common of these is for day-to-day spending like groceries, clothes, food and drinks, as well as common bills such as rent or utilities. If you have enough in your account, you can also use a debit card to make more substantial purchases like furniture and electronics. Debit cards can be utilised when travelling overseas, although you should be mindful of any extra fees associated with using your debit card in another country.

What should I do if I lose my debit card?

Notify your bank as soon as you realise it’s lost. One advantage debit cards have is that, should you misplace your card or have it stolen, it’s quick and easy to notify your bank in order to lock or disable the card. This is incredibly useful for not having your account drained by a third party who happens across it.

Do I have any other options besides debit and credit cards?

Yes – in terms of using funds online, PayPal is a useful money transfer service. However, this can’t function without first loading money into your account. This is the same for prepaid debit cards, which are another option, while Buy Now Pay Later (BNPL) companies like Afterpay can help you pay for purchases in smaller chunks but come with interest rates and fees for late repayments.

Can I receive more than one debit card for my transaction account?

Yes – these are most common with joint accounts, which you might share with your significant other. However, you can grant access to your account via a second debit card to another trusted person and still maintain overall control of, and responsibility for, the account. This could come in the form of a company debit card, for example.