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Debit card debt management
Stop creditor action and consolidate all of your debts into one monthly affordable payment – from £70 per month.

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What is a debit card?

Debit cards are an easy way of paying for goods and services without having to use credit or cash withdrawals. A debit card looks like a credit card – it’s rectangular and made of thin plastic, and you use it to make purchases.

When you pay for something using a debit card, you pay using funds from the linked account to the debit card. When you pay for something using a credit card on the other hand, you are essentially borrowing money.

A debit card is an alternative to using cash, but it comes with more financial security, it has fraud protection, and you as a consumer have consumer protection.

You can use your debit card not only to pay for items, but to make ATM withdrawals too.

When you use your debit card to make payment, you can insert your debit card into the card reader and type in your PIN (personal identification number), or you can tap the card on the card reader for contactless payments.

How can I tell if I have a debit card or a credit card?

While both debit and credit cards look similar i.e. they’re both plastic cards and they can both be used to make payments, and they might even be issued by the same provider i.e. you can have a mastercard debit card and a mastercard credit card, as well as a visa debit card or a visa credit card, the way they’re issued and used are different.

Bank debit cards

Your debit card is issued by your bank to give you access to your money in your bank accounts i.e. your current account (checking account). It will have the name of your bank printed on the card, as well as the word ‘debit’ on the right hand side.

Credit card companies

A credit card can be issued by your bank, but they can also be issued by a credit card company. A credit card allows you to make a purchase by essentially borrowing money. You have to apply for a credit card account and you only get a card if you’re approved. A credit card has interest charges and fees. Mastercard and Visa are the most common credit card issuer. A credit card will have the word ‘credit’ on the card somewhere.

What’s the difference between credit and debit transactions?

The main difference between credit and debit transactions is where the money comes from to pay for the transaction.

When you make a purchase on a credit card you spend money that isn’t yours. You’re simply borrowing money from a credit card company to pay for the transaction. You then owe the credit card provider money.

Whereas when you make a purchase on a debit card, the money is taken directly from your own current account or savings account to pay for the item.

What are prepaid debit cards?

A prepaid debit card is similar to a debit card in that it allows you to spend money without the need to withdraw cash from a cash machine.

However, unlike credit cards and debit cards, prepaid cards aren’t necessarily linked to a bank or credit union, they’re instead backed by a credit company such as Mastercard.

Prepaid cards are routinely accepted around the world. The only drawback (which might be an advantage if you have trouble managing your money), is that to use them, you have to preload money onto the card. And when the money runs out, there is no overdraft for you to dip into.

Can I use my debit card if I have no money in my bank account?

A debit card gives you access to the funds you have available in your bank account. Therefore, in theory, if you have no money in your current account you won’t be able to use your card to make a purchase, and the transaction will be declined

Saying that, there is an exception, in that if you have an overdraft facility in place you can access funds that you don’t have.

Some banks and debit card providers offer overdrafts to consumers, i.e. they’ll let you borrow a certain amount of money from them, up to a limit, but you have to repay the money you owe later.

What is debit card debt?

Most people assume that you can’t go into debt with a debit card, but that isn’t true.

While you won’t be able to make large, high value purchases with your debit card if you have no money in your bank account, you can still get into debit card debt.

For example, if you pay for something with your debit card and you don’t have enough money in your bank account to cover the cost and you go overdrawn.

Please note that going overdrawn and using an overdraft are different things.

  • Spending in an overdraft is using a pre agreed amount of money, i.e. you can borrow from your bank, without any overdraft fees or charges attached to it.

  • Going overdrawn is when you have spent money that you haven’t agreed with your bank or debit card company. When you go overdrawn, the bank or debit card provider can add overdraft fees and bank charges to your debt.

Overdraft fees and bank charges can quickly accumulate if you don’t repay what you owe, and/or you keep spending.

Even if the debit card payment is declined, some banks and debit card providers will still charge you a fee, which can take you overdrawn, leaving you liable for unarranged overdraft fees.

Going overdrawn into an unarranged overdraft can negatively impact your credit score.

Understanding debit card debt

While a debit card isn’t designed for borrowing money, that doesn’t mean that you can’t get into debt by using yours.

Going overdrawn

The most common cause of debit card debt is when someone spends money they don’t have.

You shouldn’t use your debit card like a credit card, in that, if you don’t have money in your bank account, don’t spend money. You won’t get any points or rewards like you would do for spending money on a credit card, all you will get is overdraft fees and bank charges, which can make it even harder to pay back what you owe.

When you go into an unauthorised overdraft, you will likely be charged a high rate of interest on the money you’re ‘borrowing’ as well as a daily fee for being overdrawn. This can push you further into debt, meaning you have to pay back more than you originally borrowed.

Using your debit card abroad

You can incur bank charges if you use your debit card abroad. Your bank can add a foreign transaction fee for every payment you make, leaving you with a large bill to pay when you get back home.

Always check the terms and conditions of your bank account before you travel abroad about what travel charges they are likely to levy against you, such as a foreign transaction fee.

How do I know if I have too much debit card debt?

Signs you might have too much debit card debt include:

  • You have a debt to income ratio of higher than 40%

  • You spend more money than you make each month

  • You can’t afford to pay your monthly fees

  • You’re paying off debit card debt each month rather than saving money

  • You’re looking at an IVA to manage your debt

  • You’re considering filing for bankruptcy

How to control your debit card debt

While debit cards aren’t designed to let people get into debt, that isn’t to say it can’t happen. But there are ways to control your spending and take back control of your debit card debt:

  • Check your bank account frequently. Before you make a purchase, check to see if you have enough money to cover the cost of the transaction.

  • Track your spending. Most banks have an internet banking facility or an app you can download to allow you to track your spending and monitor online purchases. Keeping on top of your spending will allow you to avoid risking a low bank balance.

  • Set a spending budget. If you struggle to control your spending, set yourself a weekly budget. Putting limits in place means you know where your money is spent, allowing you to save, get out of debt, and be prepared for any financial emergencies.

A debt repayment plan that works for you

How to pay off my debit card debt

If you’ve fallen into debt, there are steps you can take to get back financial control:

  • Understand your finances. Determine what you can and can’t afford each month. Work out a budget by comparing your income to your spending, and create a monthly budget for you to follow.

  • Set aside money. Use the budget to help you set aside money each month to pay off your debit card debt.

  • Stop using your debit card.

  • Get free debt advice from debt charities, or contact us about how to manage a budget, or for advice about different options are available to you, including debt consolidation, as well as set up a debt repayment plan.

  • Balance transfer. You could take out a 0% balance transfer credit card which will offer you a period of no interest on the debt you owe. This will get you out of your overdraft and give you a set period of time to save up the money to pay off the debt.

  • Consolidate your debt into one easy, affordable month repayment without having to take out a loan.

What can I do if I can’t repay my debit card debt?

If you’re struggling to repay your debit card debt, or you need money advice support, there are debt charities and debt companies set up to help you.

Get free debt advice today

You can get free debt advice from IVA Advice. While many people may be wary of asking for help, it’s important to take responsibility for your situation. We will offer you a plan that deals with all aspects of your financial situation, including debt advice. If you feel like there’s nothing you can do to deal with your debts, and you want advice on writing them off and doing monthly payments, then contact IVA Advice. We can help you with a debt solution or IVA proposal. We’ll help you to prepare a budget and work out what options there are to deal with your debts. Call IVA Advice and chat with us, so we can understand the best way to help you.