Q&A: Why are debit cards called debit cards?

After reading about Debits and Credits, T-Accounts, and more from our free eBook excerpts, you may be asking:

Why are debit cards called debit cards? When I use it my bank account decreases, and an asset account decreases with a credit.

True, your checking account decreases (credits) when you use a debit card. But that’s only half of the story. For the answer, you need to look at the bank’s perspective. A customer’s checking account is a liability (when you want the money, the bank better give it back.) When you withdraw money that decreases the bank’s liability. You can think of them paying you back some of the money they owe you. Liability accounts decrease with debits. The withdrawal of cash from a banking account is reflected on the bank’s balance sheet as a debit. And that is why a debit card is a debit card.

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