What Is a Debit Card & How a Debit Card Works?

A debit card is a plastic payment card that can be used instead of cash when making purchases. It is similar to a credit card, but unlike a credit card, the money comes directly from the user's bank account when performing a transaction.
Some cards may carry a stored value with which a payment is made, while most relay a message to the cardholder's bank to withdraw funds from a payer's designated bank account. In some cases, the primary account number is assigned exclusively for use on the Internet and there is no physical card.

In many countries, the use of debit cards has become so widespread that their volume has overtaken or entirely replaced cheques and, in some instances, cash transactions. The development of debit cards, unlike credit cards and charge cards, has generally been country specific resulting in a number of different systems around the world, which were often incompatible. Since the mid-2000s, a number of initiatives have allowed debit cards issued in one country to be used in other countries and allowed their use for internet and phone purchases.

How a Debit Card Works
When you use your debit card, the merchant will place a hold on your account for the amount of money of your transaction. Your bank may show you the pending transactions on your account. These are the holds put in by the merchants. The merchants then complete the transaction by submitting their transactions and then the money is taken from your account and shows up in your cleared transactions. Some merchants may take longer to file the transactions, and you may have a transaction listed as pending for a few days.

If you use your debit card at a hotel or for a car rental, the company may put a larger hold on the account to cover extra costs that you may accrue.

It is important to be aware of this so that you do not run into a situation in which your card may be declined because of the hold. Be sure to have additional money in your account if you use it for a hotel or a car rental.