Banking 101 Series – Part 1: Debit Card, Credit Card, ATM Card Explained
Differences between debit card, credit card and an ATM card.
These are very different and without proper knowledge can cause many headaches and risks to your credit rating.
An ATM card is a pin based card. That means it can be used at ATM’s to get cash as long as there is cash in your bank account. It can also be used for purchases using your pin, again there has to be money in your account. The merchant has to be using one of the electronic networks that is listed on the back of the card.
Debit cards look just like an ATM card and can be used at ATM’s. The difference is that a debit card has a Visa or MasterCard logo on the face and they are accepted wherever Visa and MasterCard’s are accepted. One of the hidden dangers with these debit cards, unless told otherwise, the bank will pay the charge even when there is not enough money in the account and hit you with a substantial penalty fee for doing that and very high interest on the balance You must notify the issuing bank if you do not want this feature. That way the charge will be rejected at the time of attempt.
A debit card is not a Credit Card. When you use a credit card the money is not deducted from your bank account. You have a credit limit and it is posted to your account.
If you use the credit card without regard for paying it off right away, you can end up paying for things two or three times. Remember the effects of compound interest. The interest rates on credit cards can get as high as 29% compounded monthly. This means items you purchase will double in what you owe less than every 4 months.
Learn these rules and you will save yourself allot of money and aggravation.