What Is a Debit Card?

A debit card is a payment card that lets you spend your own money directly from your bank account.

When you tap, insert, or use it online, the money comes out of your account right away, so you are not borrowing like with a credit card.

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If you like using a card but want to stay in control of your spending.

With KOHO Essential:

• It has a low monthly plan fee that can be waived when you set up direct deposit or add +$1,000.

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• You can subscribe to Credit Building for $10/month, it's an affordable way to build your credit history.

• Enjoy unlimited transactions and free e-transfers (never worry about fees when sending money to someone again).

How a Debit Card Works

A debit card is usually linked to your chequing account.

When you pay:

• The store sends the transaction through the payment network

• Your bank checks if you have enough money

• The purchase amount is taken from your account balance

You can also use a debit card at an ATM to take out cash from your account.

Debit Card vs Credit Card

Here is the difference in simple terms:

• Debit card

  • Uses your own money

  • No interest, because you are not borrowing

  • Good for staying on budget

• Credit card

  • Uses borrowed money up to a limit

  • You can carry a balance and pay interest if you do not pay in full

  • Can help build credit, but also makes it easier to go into debt

If you are trying to avoid debt, debit style and prepaid cards are often a safer option.

Common Ways People Use Debit Cards

Most people use debit cards for:

• Everyday purchases like groceries and gas

• Paying bills

• Online shopping, if the card supports it

• Taking out cash from ATMs

Because the money comes straight from your account, it is easier to see what you truly have left to spend.