ATM & Debit Cards

 

Basics

If you have a checking account with a bank, you are offered different ways to access your money other than using a check or a credit card.  You may qualify to receive a plastic card, which can be an ATM (Automatic Teller Machine) Card, Debit Card, a Check Card or a card with combined features.  When you want to get cash or make a purchase, you put your card in a machine, enter a pin number (a secret identification number), type in the amount you want to withdraw or use to pay a bill (not necessarily in this order) and the machine will check to see if you have the money in the bank.  If you do, the transaction will be processed and you can receive your cash or merchandise.  If you don’t, it will deny the transaction.  This is one way to make sure you don’t spend more than you have in the bank.  If you use your card other than in a branch of your bank, there might be additional fees for the use of the ATM.  You will always be shown what the fee is.  You can agree to accept the fee and proceed with your transaction or, deny it and you get your card back and your transaction will not be processed.
  • ALERT:  Historically, one of the benefits of Debit Cards are that banks do not allow debit card holders to withdraw or charge amounts higher than their available balance.  However, recently (Fall 09’) some banks are allowing debit card holders to charge more, and then imposing significant overdraft coverage fees, so as $25, to cover the amount you asked to withdraw or charge.  For example, if you make a charge for $35 and you only have $25 in the bank, the charge will go through, the bank will “loan” you to money.  For this service you will not only have to make up the $10 you were short, but also pay a fee of $25.  If you are oppose to this type of fee.   Let your bank know, in writing, and tell them you want to opt out of overdraft coverage.  The only negative is that you won’t be able to charge or take out more than you have in the bank…..But wasn’t that what Debit cards were supposed to do?  There is a Consumer Overdraft Fair Practice Bill making its way through Congress, Stay tuned.

 

 

ATM - Automatic Teller Machine Card

When you have a checking account (sometimes even special high yield saving accounts) you might qualify for an Automatic Teller Machine Card (ATM), which allows you to withdraw cash from a machine.  Most ATM machines at a bank will also allow you to deposit money, transfer money and check your account balance.  These ATM cards are debit cards.  Before an ATM machine dispenses cash, it checks to see if you have adequate funds available for that amount.  If not you won’t be able to make a withdrawal.  Your bank will also limit the amount of cash you can withdraw on a given day, which may be as small as $100 or it could be as large as $1,000 (or more), regardless of how much you have in your account.  This will be based on the type of account you have and the amount of money you keep in the bank.  Check with your bank.  The amount you can withdraw can be negotiated.  Note:  all ATM machines are not programmed the same way.  Some ATM machines might have different amounts of money you are permitted to withdraw.

When the bank issues you an ATM card they will also issue you a PIN number, Personal Identification Number (for security).  Most banks will allow you to change your pin number to one that you find easy to remember.  Never give your PIN number to anyone else!  When you go to an ATM machine you will need to insert your ATM Card and type in your Pin Number.  If you enter the wrong number more than two or three times the machine will shut down and you will not be able to make any transactions.  The machine might also capture your card.  Although machines are different, most only allow you to make withdrawals in $20 denominations (some occasionally $10). Be careful of ATM fees!

 

 

ATM Fees

Normally your own bank will not charge you an ATM fee, regardless of which of its branches you use.  Sometimes you will have reciprocal rights from another bank’s ATM if they are part of the same network as your bank (like Cirrus, NYCE or Plus), but this is not always the case.  These additional ATM fees can be costly.  If you use another bank’s ATM machine, or any ATM machine located in a mall or a store, chances are you will incur a transaction fee.  Transaction fees can range from $1.00 to $3.00 per transaction.  The machine must tell you if it is going to charge you a fee.  It must disclose the amount of the fee and you must agree to the fee (generally by tapping the "Yes" button after the charge is explained), if you expect to receive the cash.  Plan ahead—don’t be caught paying $3 if you only need $20.  Make sure you remember to deduct any ATM fees when balancing your checkbook, along with your ATM withdrawal.

One note of caution: before you use an ATM machine, check out your surroundings.  Make sure no one is lurking around. Protect your PIN number.  Bring a friend with you, especially at night for extra security.

When you shop around for a bank see Selecting A Bank if you plan to use your ATM often, see which bank has the most branches in the area you live, go to school, play, or work.  Also, check out their fees.  See the above note regarding overdraft fees.

 

Check Card

These are also debit cards that work like checks, without the hassle.  They can be used to purchase products at any merchant that accepts VISA or MasterCard.  When using a check card no PIN is used (although they give you one for extra security for online or telephone inquiries).  Instead, you will be asked to sign a transaction slip, as you would with credit card.  If you are given an option at a POS (point of sale) machine, just push the “Credit” button on the keypad and sign.  The amount will be automatically debited from your bank account.  The cards look just like an ATM card, but cannot be used at an ATM.

 

Debit Card: Combined ATM & Check Card

Although you can get one or both of the above type debit cards, this combo card, often just referred to as the “Debit Card” is the most popular.  It can function both as an ATM card and a Check Card.  Most Debit Cards are associated with the major credit cards of VISA or MasterCard.  You can use them wherever these cards are accepted, such as stores, gas stations, restaurants etc.

You will receive a PIN number with these cards.  Sometimes you can just present the card and sign, like a check card; sometimes you will put in a PIN, like an ATM card.  One of the benefits is  - that some stores will allow you to get additional cash above the amount of your purchase.  Say you spend $100 at a supermarket—you can get an extra $20 back in cash, making your total purchase $120.

Remember, you can only use a Debit Card if you have sufficient money in your account to cover your purchase.  When you are using a regular credit card it is like issuing an IOU.  It creates a loan obligation to the Credit Card Company and sometimes hefty interest charges.  Look under spending section Credit Card Changes & Managing Credit Wisely.  For young users, even most adults, a Debit Card is the best way to go.  If you don’t have the money in the bank, you won’t be able to spend it, and you won’t go into debit or have a credit problem!