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Debit Card Debt Help & Advice

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Debit card debt isn’t a type of debt you hear much about. Since debit cards are a vehicle for spending the money in your bank account, it’s not common for debit cards to lead to debt – but it is possible.

In this guide we’ll look at debit cards; what they are, the difference between them and credit cards, how you can fall into debt using a debit card, and where you can get the money advice you need if that happens.

What is a debit card?

If you’re familiar with credit cards (or charge cards) you’ll have a rough idea of what a debit card is – a plastic card that you can keep in your wallet or purse, and use to make purchases instead of using cash.

Your debit card providers are usually your local bank, or any bank who you have opened up an account with. Any time you use a debit card to buy something, the money will be taken from the account balance in the bank account the card corresponds with.

You can also use your debit card to pay in cash, by taking your card to a cash machine, entering a Personal Identification Number (PIN), and drawing money directly from your account.

What's the difference between debit cards and credit cards?

Debit cards and credit cards are very similar, both in appearance and the way you use them. They’re both plastic cards, they can both be used to make payments, and they might even carry the same logo – often, your credit card company and debit card provider are the same organisation.

The main difference between the two is where the money you’re using comes from. With a debit card, every penny you spend comes out of your own pocket – or, more specifically, your bank account.

Every time you use a debit card, the money is taken directly from your current or savings account. You’re only spending money you already have, unless you have an overdraft line.

With a credit card, on the other hand, the money you spend isn’t yours. Every time you use a credit card, you’re borrowing money from the credit card companies.

You have to repay your credit card balance every month, and any time you miss credit card payments, extra fees and charges can be added to the money you owe.

Can you get into debt through your debit card?

Debit cards aren’t designed for borrowing, but that doesn’t mean you can’t get into debt by using one. Making payments with your debit card uses funds from your own bank account, so you essentially aren’t borrowing any money for the transaction.

A debit card is much the same as using cash, but with more security and fraud protection. However, if you pay for something and there isn’t enough money in your account, you’ll go overdrawn. At this point, fees and charges can be added.

Overdraft charges and overdraft interest can quickly add up if you don’t make a payment to cover them, especially if you keep spending.

In some cases, even if your debit card payment is declined, you can still be charged a fee that takes you into your overdraft – and be in debt before you know it.

Incurring this kind of debt can have a negative impact on your credit score and may also result in you losing any benefits, rewards, or discounts associated with your bank account.

Common causes of debit card debt

Making payments with a debit card when you have no money

The most common cause of people falling into debt with their debit card is using it to make payments when there aren’t enough funds in the account for them to be covered. This often causes people to become accidentally overdrawn and incur charges.

Becoming overdrawn

This can also become the case when you withdraw money from your account that you don’t have. Going into an unauthorised overdraft means that you will be charged a high rate of interest and a daily fee that will cause you to become further and further overdrawn. This in turn will mean that you will end up paying back more than the original transaction that took you into the red in the first place.

Using a debit card when you’re on holiday

You can also incur charges by using your debit card abroad, which can leave you with a hefty bill by the time you arrive home. It’s important to check the terms of your bank account before you leave to make sure you avoid travel charges.

Do debit cards affect credit score the same way a credit card does?

The short answer is no, they don’t. Credit cards (as the name suggests) work by allowing you to access credit which you can use to make purchases, and later repay.

Every time you use a credit card or make a credit card repayment, it will be listed on your credit history. Similarly, any time you miss credit card payments, you’re credit rating will take a hit.

Debit cards, on the other hand, don’t affect your credit rating at all. Using a debit card is just another way of drawing money directly from your bank account.

The process doesn’t involve using credit, so debit card activity will never be listed on your credit history or affect your credit score in any way.

How to keep on top of debit card debt

Debit cards aren’t designed to get people into debt, but there are steps you can take to help stay on top of your debit card purchases.

  • Check in frequently

It’s important to check your account regularly before you make purchases or withdraw money. This will help you to avoid spending money that you don’t have and becoming overdrawn.

  • Track your spending

Using a banking app or online banking allows you to keep track of your transactions and control your spending. Doing this will help you avoid a low balance and reduce the risk of charges.

  • Set a budget

Setting yourself a weekly spending budget is one of the best ways to control your finances.

Giving yourself limits means you will know exactly where your money goes each week and allows you to be prepared for unexpected expenses.

Where can I get debt advice and help with debit cards?

If you’re struggling with debit card debt and are in need of money advice or support, we can help.

Creditfix specialises in expert debt help, and our team of advisers will be happy to listen to your situation, offer their advice, and take you through the solutions available to you.

We can start to work through your debt problems from the moment you contact us. Get in touch today on 0800 0431 431 for immediate and confidential free debt help.