Q: Why do some people call them debit and others say ATM cards? Are they the same thing or are there differences between the two?
A: Like you said many refer to them as one and the same. The truth is they are quite different.
What are ATM cards? These operate over a network of different banks connected together. Look on your card to find out which network(s) it can access: STAR, LINK, Cirrus, PULSE, PLUS, Interswitch, Interac. You will know you are making an ATM purchase/transaction because when you do so, you will be required to enter your PIN.
What are debit cards? These are much more common. You have the ATM capability mentioned above, as well as the ability to make purchases without a PIN over the Visa or MasterCard network, processed the same way as a credit card transaction (that’s why you have to select “credit” instead of “debit” to do this).
- More versatility. Can be used for everyday purchases as well as banking transactions like deposits and withdrawals at ATMs.
- For those prone to mismanaging their money, a debit card is a simpler option than a credit card, since you can spend only the money in the bank.
- Since no PIN is needed for debit purchases, if your card is stolen then fraudulent purchases can be easily made. With no buffer between the money in your checking account and the debit card, the criminal could easily deplete your checking account balance. Debit cards also have fewer legal protections against fraud than credit cards do (although many banks will be more generous than is required by law). Even though fraudulent purchases will likely be reversed, it doesn’t change the fact that during your checks may have bounced while you were sorting things out.
- No rewards on purchases.
versus ATM Cards…
- The PIN is always necessary for a transaction. This might make fraudulent usage more difficult.
- ATM transactions outside your bank probably involve fees (both by your bank as well as whatever the ATM charges).
- The legal protection surrounding PIN-based debit/ATM card transactions are flimsy, at best. You can see this for yourself in this FTC article.
Debit cards vs. ATM cards… which are better?
That depends on your needs. The part the scares me about both is that you might be liable for fraudulent transactions if your PIN was used to commit them — although things are changing in October, when it comes to MasterCard cards.
On the other hand, if fraud is committed without a PIN (as a credit transaction over Visa/MasterCard) the card’s zero liability protections come into play.
What’s the safest bet for 2016?
A prepaid card acts as a good safety buffer. If someone steals your ATM or debit card, they can spend your money and even if the bank refunds the money, it could still cause temporary problems like the checks you write for rent or car payments being bounced, because of insufficient funds. For that reason, I recommend going with a prepaid card like this for your purchases, so your bank account isn’t directly at risk. This can create a buffer between card fraud and the bulk of your hard-earned cash. Plus, you generally have zero liability (meaning you get all your lost funds back) if you notice any fraudulent activity within two business days and report it to your card issuing bank.
However ultimately, you get the best fraud protection with an actual credit card. The Federal laws protecting you against fraud are much stronger for credit versus debit. With credit, the most you can be held liable for is $50 per incident (but practically all major credit cards waive the $50 “deductible” and give you $0 liability). With a debit card, unfortunately, your liability is only limited to $50 if you report the loss or unauthorized purchase within 2 business days. Then your liability jumps up to $500 between 2 and 60 days. After that your liability is unlimited! So, do yourself a favor and get a credit card to use fro most of your purchases in order to gain better protection against fraud. If you need a good one to start with, here is a good place to start:
Updated February 15, 2016