ATM Card, Debit Card, Credit Card: What’s the Difference?

I recently had a conversation with a local bank manager for an international bank.  The branch of this bank is located in a wealthy northern New Jersey town.  He told me about his frustration with his customers that did not understand the differences between an ATM card, a debit card, and a credit card. 

Here is a brief description of each type of card and how it may affect a consumer’s checking account balance.

What is an ATM card?

ATM means Automatic Transfer Machine and they have been around since the late 1960’s.  ATMs are mostly used to withdraw cash, but a consumer can also make deposits into one’s account during and outside normal business banking hours.  This card can only be used at ATMs.

All withdrawals using an ATM card are immediately deducted from the customer’s account. 

But my ATM has a Visa or MasterCard logo, what does that mean?

This is the most confusing type of card.  This card can be used as an ATM card or at the point of purchase as a debit card or credit card.  No matter how the card is used, it will be automatically deducted from the consumer’s checking account. 

If the card at the point of purchase is used as a debit card, a PIN is usually requested.  In this case, even though it was swiped as a credit card, it is still considered a debit card transaction.   While it may take a few days, the purchase price will be deducted automatically from the customer’s checking account.

If the card at the point of purchase is used as a credit card, the consumer usually does not provide a PIN.  The purchase is immediately deducted from the customer’s checking account.

Whether a debit card is swiped as a debit or credit card, the purchase will be automatically deducted from the consumer’s checking account.  The consumer must keep a record of the transaction and deduct it from their checking account balance the day of the purchase.  If not, a consumer may cause an overdraft on their checking account.

What is a credit card?

Credit cards allow a consumer to purchase goods and services by borrowing against an approved line of credit.  It is a loan.  Purchases made during the month are billed to the consumer and the consumer pays the bill at a later date.  Should the consumer be unable to pay the entire balance due, then the credit card issuer charges the consumer interest. 

Unlike an ATM or ATM/Debit card, all charges as well as any cash advances are not automatically deducted from a consumer’s checking account, unless specific arrangements are made through the consumer’s bank.

Table showing different types of cards

Type of Card

Immediate Withdrawal from bank account

Receive a bill and pay at a later date

ATM

Yes

No

ATM/Debit Card with Visa or MasterCard logo*

Yes

No

Debit Card with Visa or MasterCard logo*

Yes

No

Credit Card (American Express, Discover, MasterCard, Visa)

No

Yes

* The consumer must choose at the point of purchase whether the transaction will be a debit card or credit card.  If it is swiped as a credit card transaction, the money may not be deducted for several days.

In summary, a consumer must understand the differences and similarities between the different types of cards before purchasing goods and services.   

Written by Diane Nissen, CMA a family budget advisor and money coach for The Alexandrite Group. Ms. Nissen teaches families and individuals how to make “Conscious Money Choices” throughout the U.S. and writes a blog at NJMoneyCoach.com.