A debit to your bank account occurs when you use funds from the account to buy something or pay someone. When your bank account is debited, money is taken out of the account. The opposite of a debit is a credit, in which case money is added to your account.
Some examples of a debit are when you set up a direct debit and money is automatically taken out of your account to pay a bill, you write a check and it is cashed, or you use a debit card, which enables you to take money from your bank account and use it to purchase goods and services, like an electronic check. Learn more about the steps that take place when a bank account is debited.
Key Takeaways
- A bank account is debited when a transaction is made, usually with a debit card, billpayer system, or a check.
- When a debit card is swiped or processed for an online transaction, the first step is that the bank is notified electronically.
- As part of a debit card transaction, the bank puts a hold on the account for the amount of the transaction.
- The retailer sends the transaction details to the bank and, after reviewing the details, the bank transfers the money to the retailer.
How a Debit Card Works
The step in the process of using your debit card to make a purchase is that your bank is notified of the purchase electronically. This occurs instantaneously when you swipe your card or enter it on a website to make an online purchase.
Data is also sent to the card-processing network, Visa or Mastercard, for example, which verifies the transaction data and checks that the debit card hasn't been reported lost or stolen.
The processor also confirms that funds are available in the cardholder’s account and whether the transaction has been approved. The transmitted data includes the card number, transaction amount, and date. The data will also include the merchant’s name and merchant category code, or MCC, plus any rewards program information.
Because a transaction generally takes at least 24 hours to complete, thebankputs a hold on your account for the amount of the transaction. This action prevents you from using the money. Ideally, the hold lasts long enough to earmark the funds until the transaction is complete.
Next, the retailer from which you made your purchase sends the details of the transaction through the network to your bank. Your bank reviews the details and, if everything is verified, electronically transfers the purchase price to the retailer, effectively removing those funds from your account. Essentially, the bank debits the purchase price from your account.
Each bank transaction is composed of a debit, which includes removing money from an account, and a credit, which adds money to the receiving account.
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How a Check Works
When you write a check, the payee deposits the check to their bank, which sends it to a clearing unit such as the Federal Reserve Bank. The clearing unit then debits your bank’s account and credits the payee’s account. Checks are deposited electronically using an app, or they are deposited by mail or in person.
How Automated Bill Payment Works
With automated debit transactions, you allow a creditor to deduct money from your checking or savings account on a regular basis. The payee has access to your bank account information and bank routing number, so it can execute the transaction. As such, there's a risk in giving another party that information.
Also, if you don't monitor your account, you could become overdrawn and rack up overdraft fees. Another option is to pay bills yourself through a bill payer. That way, you maintain control over what amounts are taken out and when.
What Does It Mean When a Bank Account Is Debited?
When your bank account is debited,money is withdrawn from the account to make a payment.Think of it as a charge against your balance that reduces it when payment is made. A debit is the opposite of a bank account credit, when money is added to your account.
How Can You Use an Automated Debit To Pay Bills?
People set up automatic payments with a merchant or other service provider to pay bills and other recurring payments that are debited from their bank or credit union accounts.This could be for utility bills, credit card bills, monthly fees for childcare, gym fees, car payments, or a mortgage, for example.Such automated payments can be a convenient way for people to make sure they pay their bills on time.Some lenders offer an interest-rate reduction on loans that are paid back in this way.
Can You Withdraw Cash from a Bank Account With a Debit Card?
Most debit cards also can be used to withdraw cash at ATMs (automated teller machines). In addition, if you use a debit card at a retail store, you or the cashier run it through a scanner that enables your financial institution to verify electronically that the funds are available and approve the transaction.
The Bottom Line
A debit to your bank account happens when you use funds from the account for a payment. When your bank account is debited, money is taken out of the account. The opposite of a debit is a credit, when money is instead added to your account.
Debits can occur when you set up a direct debit order and money is automatically taken out of your account to pay a bill, when you write a check and it is cashed, or if you use a debit card, which lets money be taken from your bank account to pay for goods and services.
Several steps happen to complete a bank account debit. For instance, if you're using your debit card, your bank will be notified once you swipe the card and it will hold the amount of the transaction. Then your bank will send the transaction details and eventually payment to the merchant you're paying.
