Benefits & Drawbacks of Using an ATM Card

ATM debit cards often come free of charge from a bank where you have a checking account. Although debit cards usually look like a credit card from a major company, every transaction you complete with an ATM debit card reduces your checking account balance. ATM cards from your bank, credit unions and other financial institutions also belong to electronic financial networks. This helps to make using your card at other ATMs almost seamless.

With a debit card, you enjoy the convenience of getting money and making deposits to your checking account on your own schedule instead of just during banking hours. It’s easy to withdraw money from another bank’s ATM too. Generally, you can check your checking account balance at your own bank’s ATM, but this service isn’t always available when you use a different bank.

The Federal Trade Commission says that an ATM card helps you save on fees and interest charges for credit card purchases. You can limit your spending by only what you have in your checking account. Overdraft fees are rare because you can’t spend money that isn’t in your account.

An ATM card makes shopping for groceries, gas and other necessities as simple as swiping your card in the terminal. Many larger stores also let you grab a little cash along with your purchases during the same transaction. This saves you time and speeds up checkout. Restaurants, movie theaters and fast-food restaurants are just a few places that accept ATM card payments.

Online shopping with an ATM card is like shopping with a credit card. Once you fill your cart, you only need to supply your card number, expiration date and the special code to pay for your order. Remember though, that online vendors are drawing that money directly from your checking account.

ATM cards are more secure than your checkbook and cash. If you lose cash, it’s just gone. Your bank will limit your loss from a lost or stolen card to $50 when you notify them within two days, says Clark Howard. Even if thieves get your card, they need your personal identification number to use it.

You’ll usually pay a small fee to use an ATM that doesn’t belong to your bank. In some cases, you pay fees to the ATM’s owner and your bank too. Your bank might allow you to use your debit card in foreign countries, but they will charge hefty foreign exchange fees. You must make a minimum purchase to use a debit card at some places. Buying things that you don’t need makes it harder to limit your spending.

Unless you have online banking, you’ll have to wait to receive a monthly statement to review your debit card transactions. This will delay catching unauthorized use or ATM fraud. Debit cards don’t help you build a credit history because, essentially, you’re using your own money, not credit.

Almost all credit cards offer purchase protection or extended warranties for large purchases. This valuable feature of credit cards is rarely available when you buy expensive items with an ATM card.

Certain vendors, such as gas stations, car rental agencies and hotels often put holds on your funds when you use a debit card. The Federal Trade Commission warns consumers that the vendor’s estimate of your total bill could be an amount close to your checking account balance. Once the vendor blocks this amount, you won’t be able to use your debit card for any other transactions.