Using a debit card or ATM card may seem like second nature to many, but what are these cards anyway? How do they work? Whether pulling money out of your bank account to have cash on hand or using a card for purchases, it is critical to understand what these cards are and how they work.

What is a Debit Card?

A debit card is a card that uses money from the linked bank account to make purchases. The money is drawn from the available balance in your account in real-time. You can use your debit card for purchases in person or online at most locations. Some also work with mobile payment platforms such as Google Pay and Apple Pay.

Differences Between Debit, ATM, and Credit Cards

It's essential to know the difference between each of these types of cards before you choose them. Here's a rundown.

Debit Cards

Debit cards are provided by a bank to allow you to access money from your existing checking and savings accounts. You can use this card for purchases and withdraw cash from your account. Most often, they look just like credit cards.

Some debit cards offer rewards programs for purchases, much like some credit card rewards programs. Though they are less common, debit cards with cash back rewards often provide 1% or more in cash back to you for purchases you make using the card.

Debit cards do not provide any line of credit to you, which is one of the most critical differences these cards have from credit cards. Using your debit card is the same as writing a check, with funds being paid from your account balance. Today, it is not often possible to withdraw more money from your account than is available because the transaction is declined. However, you could pay significant overdraft fees if you overdraw your account.

Most often, debit cards do not have significant fees when you use them. Some companies may charge you a fee if you use the debit card at a payment location instead of using it as a credit card. This is where these cards can become confusing. Many debit cards carry logos like MasterCard on them, allowing them to be used any place MasterCard is accepted. When you swipe your card, you can choose to run it as a credit card or a debit card.

Either way, a debit card will withdraw funds from your bank account. Verify from your bank if additional costs are present if you have to enter a PIN to make a purchase. You must input your PIN whenever you use it as a debit card. Some banks may charge you a fee if you use it this way instead of just swiping it as a credit card. Terms and conditions vary in this area.

ATM Cards

An ATM card may be provided by some banks and credit unions. Typically, these cards can only be used at an affiliated ATM to withdraw money from your checking or savings account. They also may allow you to make deposits or transfer funds between accounts within the same bank. ATM cards do not have payment benefits, typically, which means you are unlikely to be able to use them to make purchases.

ATM cards are not commonly used as often as debit and credit cards because they have limited features. Most banks incorporate ATM features, such as removing money from your account at an ATM, with your debit card, eliminating the need for both options.

Credit Cards

Credit cards do not pull money from a bank account but provide you with a line of credit that you can use and then pay back over time. Credit cards are commonly used for purchases, and the key to remember is that you will be required to pay interest on any outstanding credit balance. Interest rates range from 10% to 30%, depending on your credit score.

Credit cards are essential tools to help build up your credit score. You can carry a balance from month to month on them, which increases the cost of using them.

Choosing Which Card to Use

The decision here is simple. If you want to withdraw money from your bank account to pay for a transaction, use your debit card. If you're going to borrow money to make a purchase, use a credit card.

Debit Card Fees

Fees for debit cards range widely between banks. Some may offer no fees if you withdraw funds from your associated bank at an ATM, and others charge fees if you use a PIN to make purchases.

Other Debit Card FAQs

• Are debit cards safer to use than credit cards?

  In general, debit cards are safer to use than carrying cash. They carry the same risk of theft as credit cards, but to use them, people often have to have your PIN.

• Do debit cards limit your ability to use the cash in your account?

  You cannot use more than what you have in your account. Some banks limit how much you can spend per day using your debit card. There may be a daily or per-transaction limit you need to know about before using your card.