What Is a Bank Card?

Bank Cards Explained

A person uses a bank card to make a purchase.
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A bank card is a payment card issued by a bank that you can use to make purchases and, in some cases, withdraw cash.

Learn how bank cards work, what types there are, and available alternatives.

Definition and Example of a Bank Card

Banks are payment cards that banks issue to customers. This type of card can include debit, ATM, and credit cards.

  • Alternate names: Debit card, ATM card

A good example of a bank card is a debit card your bank issues when you open a checking account. When you use your debit card to make a payment, the bank deducts the transaction amount from your linked account.

How a Bank Card Works

Most bank cards are printed with a unique card number, an expiration date, the cardholder’s name, an EMV chip, a CVV or CVC code, and magnetic and signature strips on the backside of the card.

The CVV or CVC is a three or four-digit verification code printed on the card. The EMV (Europay, Mastercard, Visa) chip is a secure computer chip on the front of the card to prevent fraud. Not all bank cards use EMV technology with their chip cards, but most do. EMV cards account for the majority of card payments around the world.

To complete a transaction with a bank card, insert the side of the bank card with an EMV chip into the payment terminal, or for cards without a chip, you’ll swipe the magnetic strip.

For a debit transaction, most point-of-sale machines will ask you to enter a PIN or provide your signature to verify your identity. A debit card transaction usually has an option to receive cash back. Cash back allows you to make a cash withdrawal on top of your purchase. The money you withdraw is deducted from the balance of the account the card is linked to.

For a credit transaction, you may have to sign a receipt to verify your identity. The money is held within your account and released within a couple of days. You can’t get cash back when using a credit card to make a purchase.

More than one person can carry a bank card linked to the same account; however, their debit card and CVV numbers will differ.

If your debit card is lost or stolen, Regulation E and the Electronic Funds Transfer Act (EFTA) protects your account from fraud depending on when you report it. If you report the card lost or stolen before it’s used, EFTA states you are not responsible for unauthorized transactions. However, if you report it after it has been used fraudulently, your level of liability varies:

  • Before any fraud occurs: $0
  • Within two days of a fraudulent transaction: Your maximum loss is $50. 
  • More than two days after the fraud but less than 60 days after you receive your statement: Your maximum loss is $500. 
  • More than 60 days after the fraud: No cap on your liability.

Types of Bank Cards

Debit Card

Whenever you open a checking account, the bank will issue you a debit card linked to the account. First, you’ll have to create a secure PIN associated with the account. When you use the card to pay for goods and services, you’ll be asked to enter your secure PIN code, then money will be deducted automatically from the linked account.

Some banks offer “round up” options on debit cards. When you make a purchase, the bank rounds up your payment to the next dollar, then deposits the difference in a savings account.

ATM Card

ATM cards are linked to a checking or savings account and can only be used at the bank’s teller machine to make withdrawals, deposits, or check account balances. These transactions require a PIN. You can’t use an ATM card to make purchases.

Credit Card

While debit and ATM cards pay for transactions or provide money based on the cash you have in your linked account, credit cards allow you to pay for things using a revolving line of credit. If you pay off your purchases when your bill is due, you won’t pay any interest. If you don’t pay off your balance, you’ll pay an annual percentage rate (APR) on your balance—unless you have a zero-interest offer from the issuer.

Alternatives to a Bank Card

Another option is a prepaid card. A prepaid card is loaded with funds in advance. However, you can only spend up to the amount placed on the card. Most prepaid cards are reloadable and allow you to pay bills and other types of transactions.

Some issuers may charge fees for basic preloaded-card services such as cash withdrawals or balance inquiries.

Another alternative to bank cards is using cash and checks to pay for expenses. Using only cash and checks can be an effective way to know how much you’re spending each week. The envelope budgeting system is based on cash-only purchasing.

Key Takeaways

  • Bank cards are payment cards issued by a bank and include debit, ATM, and credit cards.
  • Bank cards allow consumers to make electronic purchases for goods and services.
  • Bank card transactions debit money from the cardholder’s account immediately.
  • Most bank cards require a PIN or signature for transactions, in addition to an EMV chip for added security.
  • Not all bank-card services are free.