Who doesn’t love their debit card? All the convenience of cash but without all that loose change weighing you down. As easy to use and helpful as debit cards are, they can come with their own set of problems. Losing your wallet can feel a lot scarier when your entire checking account is connected to it. To make sure you’re getting the most benefits out of your debit card — and protecting yourself — let’s review how debit cards work, your debit and credit options and any risks you should be aware of.

How debit cards work

So how exactly does a debit card work? You can get a card from any bank or credit union where you have a checking account. The good news is any money you spend with a debit card already belongs to you as debit cards are funded by the money in your checking account.

Most stores will allow you to use your card to make purchases. When you want to make a purchase, you’ll usually swipe the card and enter a PIN number on a keypad. A debit card will generally take the money out of your account immediately.

Your PIN number is a security code that is unique to your card. PIN means “personal identification number” and is given to you by your bank or credit union when you receive your card. You can usually customize your PIN to whatever you’d like it to be. The PIN protects you from fraudulent purchases. If someone else tries to use your debit card to make a purchase, they usually won’t be able to without the PIN. That’s why it’s important to never share this number with anyone. It’s best to memorize the number and not to write it down anywhere it can be found.

If you require paper money and don’t want to visit your bank, you can use your card to get cash from an ATM machine. Just beware that fees at in-store ATMs can be steep. Some stores will offer you “cash back” from your account when you make a purchase with your debit card.

Debit card fees and fine print

Sometimes debit cards are free to use, but some come with fees. You need to be aware of any fees your bank may charge for usage of your card, including penalties. Financial institutions must provide cardholders with disclosures that explain the potential fees that can arise through use of a debit card. Double-check the disclosures before use to avoid getting hit with unexpected fees.

Common fees you may incur using a debit card:

• Some banks may charge a fee if your PIN is used to conduct a transaction instead of signing your name.
• If you spend more on a purchase with your card than you have in your account, then you may be charged a penalty fee. This fee is similar to when you “bounce” a check.
• If you use your card at an ATM to withdraw cash and that ATM machine isn’t operated by your financial institution, you may be charged a fee.

Debit cards vs. credit cards vs. prepaid debit cards

Even though debit cards and credit cards look nearly identical, they couldn’t be more different. Here are the key differences you need to understand.

How they work: Credit cards use borrowed money, whereas debit cards use money you already have in your bank account. With a prepaid debit card, you deposit a specific amount to that card that can be spent. A prepaid debit card is usually not attached to your checking or savings account.

Beware of overspending: If you make a purchase with a debit card and you don’t have enough funds to cover it, you may be charged an overdraft fee. A credit card that is charged over the credit limit may also result in a fee. Because prepaid debit cards have a set amount you can draw from, they cannot be overdrawn.

How to recover a lost debit card

It’s important to know your rights when you lose a debit card. If you report a card missing (by contacting the card issuer) before it’s been used fraudulently, you aren’t responsible for any unauthorized transactions, according to the Electronic Fund Transfer Act (EFTA). If your card is used fraudulently before you report it, your responsibility varies depending on how quickly you report it.

What if your card has been used fraudulently, but you haven’t actually lost it? If your card is not lost, you aren’t liable for unauthorized transactions as long as you report any fraudulent transactions within 60 days of your debit statement being sent to you.

If your card has been lost or stolen, you need to act quickly. Report the loss or theft of your debit card to the card issuer as soon as possible. Most companies have toll-free numbers you can call 24 hours a day to report card loss.

Other steps you can take to protect yourself after losing a debit card include:

• Follow up with a letter or email. Send a letter or email to your bank and include your account number, the date and time you reported the loss, as well as when you noticed your card was missing.
• Review your statement. Check for any transactions you didn’t make and report any unauthorized transactions to the card issuer. Once your letter is ready, send it to the address provided for billing errors.
• Check your homeowners or renters insurance policy. It may cover your liability for card theft.

Risky places to use your debit card

You should be careful of where, when and how you use your debit card. These are a few scenarios in which you should apply caution while making transactions with your card:

• At a checkout counter, ATM or gas pump. When entering your PIN in public, you should block the keypad so no one can see you enter it. If possible, use a do-it-yourself scanner. If a store employee is running your card, watch them carefully to ensure they aren’t running your card through two scanners instead of one. A second scanner may be used in fraudulent scenarios to capture account information in order to make a counterfeit card.
• When shopping online. If you use a card to shop online, make sure your computer is secure. Avoid public Wi-Fi, and install and update virus and spyware protection software before doing any online shopping with your debit card.

Good options for prepaid debit cards

Prepaid debit cards can be found at certain retailers. Once you’ve chosen a card, review the fees associated with using the card, and double-check online to make sure there is no vital information about fees missing from the packaging. It’s important when shopping for a prepaid debit card that you fully understand the fees you may be agreeing to when using the card.

For federal benefit recipients, the Treasury Department recommends the Direct Express card. It is a debit card for federal benefit recipients who don’t have a bank or credit union account. This card can be used to make purchases at stores that accept Debit MasterCard. Cardholders can also use this prepaid debit card to pay bills, purchase money orders from the U.S. Post Office or get cash from select ATMs and banks. There are no sign-up fees or monthly account fees to worry about with this card.