How Do Debit Cards Work?

Find out exactly how debit cards work and compare card providers right here with Savvy. 

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, updated on September 13th, 2023       

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Debit cards are used by millions of people across the world for their everyday spending, so it’s important to know how they work before you take one out. You can find out how debit cards work here with Savvy and compare a range of card features so you’re up to date with the latest technology. Learn everything you need to help you make an informed decision on which debit card suits your needs today.  

What is a debit card and how do they work?

A debit card is a plastic card issued by a bank or financial institution which allows you to access the money in your bank account to spend, shop and pay bills. The numbers on your card and the digital information contained in the microchip embedded within it link your purchase to your bank account, so your funds can be transferred to the retailer instantly. 

A virtual version of your debit card can also be added to your smartphone’s digital wallet. They don’t exist as physical cards but can be stored in a digital wallet and used for EFTPOS and online payments in the same way as a plastic or metal debit card. 

All types of debit cards work on the three payment networks in Australia, which are provided by Visa, Mastercard and American Express. When you tap or swipe your debit card at an EFTPOS terminal, an electronic message is sent to your bank to verify that there are sufficient funds to cover the payment. When a positive response is received, the payment request is authorised and payment is sent from your account and deposited into the merchant’s bank account. 

Of course, all this information-swapping happens in milliseconds automatically, so there’s no delay when we tap our cards to pay. The same principles apply when sending a payment online using your debit card numbers or when you insert your card into an ATM to withdraw cash.  

If you try to spend more money than you have available in your linked bank account, however, the transaction will be declined and you won’t be able to use your card to pay. 

What are some of the debit card features I should compare?

There are several features you should be aware of and actively compare when choosing a new debit card.  These include: 

  • Fees – most offers on the market are no-fee cards, meaning you won’t be charged monthly fees or account-keeping fees. The exception is prepaid debit cards, which do come with recharge and other fees 
  • Reward points – check whether the card offers any frequent flyer points. The reward points offered can either be Qantas’ frequent flyer points or Virgin’s Velocity frequent flyer points. These two schemes are linked with Woolworths Everyday rewards and Coles Flybuy points respectively. It could be worthwhile aligning your new debit card with your preferred airline and favourite supermarket  
  • Cashback offers – these are sometimes awarded for opening a new bank account and accepting a debit card. There are also ongoing monthly cashback offers (with a monthly limit) if you use your debit card to pay utility bills 
  • Free ATM cash withdrawals – the number of ATM terminals available for you to withdraw cash is also worth considering when comparing debit cards. If your bank is a member of the Global Network Alliance, you’ll have a choice of 50,000 ATMs all over the world to choose from, with no withdrawal fees to worry about 
  • Security – check your card can be locked quickly and easily using online banking or a mobile app. This is vital if your debit card is stolen, as seconds can count when your card is in someone else’s hands 
  • Digital wallet compatibility – check that the card you choose is compatible with the digital wallet you have on your phone or wearable device, as not all cards are compatible with all digital wallets 

The advantages and disadvantages of debit cards


Convenient to use 

Debit cards are easy and convenient to use in EFTPOS machines, ATMs and for online shopping with either a physical or virtual card. 

Accepted almost everywhere 

Debit cards are accepted anywhere you see the Visa or Mastercard sign, so they’re a form of payment accepted almost everywhere. 

Easy to lock 

It’s usually possible to lock your debit card using online banking or a mobile app to protect your funds in case your debit card is lost or stolen. 


There are usually no fees charged to use a debit card in Australia, so they are a cheap and easy way of accessing the funds in your bank account. 


No credit available 

With a standard debit card, you’re only able to spend the funds you have available in your linked bank account (or by agreement with your bank in the form of an overdraft facility). 

Daily transaction limits 

Many banks specify a daily transaction limit of between $1,000 and $2,000, so this limits the amount of spending you can do in one day. 

Overseas fees

Unless you have a special travel debit card, you may be charged foreign transaction fees and currency conversation fees if you use your debit card overseas.

More of your frequently asked questions about how debit cards work

Can you get a debit card specifically designed to be used overseas?

Yes – there are many debit cards available which are designed specifically for people intending to use them overseas, which are often known as travel cards. These cards allow you to exchange currency before you travel and store it on your debit card. They often have no overseas transaction fees and allow you to use ATMs overseas free of charge. 

What is the difference between a standard debit card and a prepaid one?

A standard debit card is linked to your transaction account and allows you to spend the money in the account. A prepaid debit card isn’t linked to a bank account. You recharge it by transferring money onto the card from your bank account and are then able to use the card up to the amount you’ve deposited. However, they can come with recharge and membership fees, so they can prove to be more expensive than a standard debit card. 

Is it better to use a debit card or a credit card?

These two types of card are designed for different purposes. A debit card is most useful for everyday purchases, paying bills and shopping online. You are only able to spend the money that is already in your linked bank account. A credit card is best used for larger purchases, where you may need to spread the cost out over several pay periods by using the credit which comes with a credit card. However, consider the high interest charged on credit cards before making a large purchase, as debts which take months to pay off can attract a high amount of interest.   

Can I get an extra debit card for the same account?

Yes – many banks allow you to have more than one debit card linked to the same bank account. It can be useful to have a second debit card if you have a joint account with your partner or a child, as it allows both parties to access the same funds in the same way. An extra debit card can also be useful if adult children are helping to care for their elderly parents and need to access their parents’ bank account to buy groceries or pay bills. 

Compare debit cards today

Compare Australian debit cards with Savvy to help you pick out the best available deal for your needs.


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