Is there any difference between an ATM card and a debit card? Is it better to use an ATM card, debit card, or credit card?
Americans have more than 2 billion ATM, debit, and credit and charge cards – an average of more than nine cards per (adult) person. With all these “cards,” sometimes it’s hard to remember which one does what. Here is some basic information on the differences between ATM, debit, and credit cards.
ATM cards allow bank customers to make a number of different transactions without actually going to the bank teller. Bank customers commonly use ATM cards to withdraw money, make deposits, and check their balances.
Banks issue debit cards, which can be used at any store that will accept them. When someone pays with a debit card, the money for the purchase is automatically deducted from that person’s checking account. Think of a debit card as part ATM card and part personal checkbook.
Credit cards let people buy items on credit and pay for the item at some later date. As many people find out the hard way, buying on credit can be expensive. The interest rate on bank credit cards averages around 13%. Gasoline cards and department store cards really sock it to you by charging (on average) close to a 20% interest rate.
There are several advantages to using an ATM or debit card. First, you generally don’t have to carry around identification as you would if you wanted to write a check. Second, you pay for the purchase out of your checking account immediately, which prevents you from running up interest charges as with a credit card. Alternatively, disadvantages to using an ATM or debit card include the inability to have the extra time to pay the bill as with a credit card. Also, credit cards give consumers the right to lawfully withhold payment if there is a dispute with the merchant over the goods or services. Read next week’s column to learn more about what happens when an ATM card is lost or stolen.
This article appears in January 21 • 2005.