Cash card

What is cash card?

A cash card is a payment card that allows you to pay for things with money stored on it or sometimes withdraw cash from an ATM. If you have a checking account, you almost certainly have a type of cash card called a debit card. All cash cards have a magnetic stripe that stores card data, but more advanced cash cards, called smart cards, also store info with an extra secure chip.

Deeper definition

To pay with a cash card, simply swipe the magnetic stripe or insert the chip in a card reader. The total cost of the transaction will be automatically deducted from your balance or account. In the case of a debit card, this means directly from the checking account at your bank. To complete a debit card transaction, users must enter their personal identification number (PIN) at the point of sale. Typically, people can use debit cards anywhere that accepts credit cards as well as at ATMs.

Some cash cards only work at ATMs. These give users access to their bank accounts, where they can be used to make withdrawals, balance inquiries, or other services offered at the ATM. However, they can’t be used to make purchases.

If you don’t have a bank account, you might still use a prepaid debit card. Some employers, especially fast food companies and in retail, pay their employees with just such a card by loading their wages onto it. Sometimes these have fees for use or activation. Other forms of prepaid debit cards can be loaded by the user, especially if they want a convenient way to spend cash without having to link it to a bank account.

Some cash cards are issued by a retailer. These are usually called gift cards, and they come with a preset balance that can sometimes be topped up if desired. They’re also not linked to a bank account and can only be used at the issuing retailer, and they’re typically discarded when the balance reaches zero.

Although nearly identical in physical appearance and use, cash cards should be distinguished from credit cards. On a credit card, your spending is limited by a line of credit, which the bank essentially loans out to you and expects to be repaid each month. With a cash card, your spending is limited by the actual cash you have on hand.

Credit cards also often come with enticing rewards. Check out Bankrate’s list of the most rewarding credit cards.

Cash card example

Lewis and his buddy Clark are making a trip out west. It’s a long journey and they don’t want to carry a lot of cash. Lewis suggests getting a prepaid debit card and loading it up with the amount of money they want to spend. Clark also brings a gift card he got for his last birthday: it was issued by the McCormick General Store, where he plans to make a stop to buy a new pair of boots with its remaining balance.


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