Difference Between ATM Card, Debit Card And Credit Card

Plastic money has become a phenomenon the world has welcomed with open arms. From withdrawing money using an ATM Card to swiping a multi-purpose Debit Card, these little pieces of plastic have evolved to make using and managing money easier than ever before. But how do you distinguish between a Debit and Credit Card or even an ATM card? They may all look the same, but each offers different features to meet different needs.You can own all three types of cards, but do you really need them? They may appeal to your financial needs, but it does not mean you should have a Debit, Credit and ATM Card. Let us dive deeper into the features and benefits of each card so the next time you decide to swipe a card, you get the best returns on your money. Read More : How to use a credit card wisely

Among the most used payment cards worldwide, Debit Cards are a sort of prepaid card.

• How it works A Debit Card is linked to your Savings Account, giving you access to the accumulated funds to make payments, purchases and more. It is hassle-free because you do not have to write a cheque or make cash withdrawals to meet your financial needs. It is a perfect option if you operate your daily finances consciously.
• Perks You can use your Debit Card almost anywhere, from restaurants and stores to online purchases or even withdrawing cash from ATMs. This is because you are spending money you already have from your bank account. The money is debited from your account immediately, and you get instant alerts for the same.
• Security Financial institutions add a layer of protection to safeguard your Debit Card if it gets lost or stolen. Debit Cards have numbers embossed on the front, along with the cardholder's name. A magnetic strip on the back with a CVV code and a secure microchip in the front hold essential details of the cardholder's account. Each card requires a PIN (Personal Identification Number) to complete a transaction. Failure to do will render the payment incomplete.

Unlike Debit Cards, Credit Cards are not handed out by banks when you open an account. You must apply for one and meet the qualifying parameters. The bank assesses your credit score to determine your credit limit.

• How it works Under the guidelines laid out by financial institutions, Credit Cards allow you to borrow money from the bank to make immediate transactions. The borrowed money must be paid within a specific period, which is generally 30 days. Post this period, you may incur heavy interest rates, making credit cards an unpopular choice among budgeted spenders.
• Perks Credit Cards offer access to instant funds for offline and online purchases. Since they are not linked to your Savings Account, you can use your card for making purchases even if your account is low on funds. Most Credit Cards come with the opportunity to win points and other rewards that encourage cardholders to use them more often.
• Security Like Debit Cards, Credit Cards also come with a PIN that you have to enter to authorise transactions. Sometimes, when making online transactions, you might have to provide the OTP sent to the registered mobile number to authenticate a payment. These layers ensure better security for Credit Cards.

Read more : Here’s why you should get a Credit Card if you do not have one

So, now that you know how Debit and Credit Cards differ, you may wonder what an ATM card is and how it is different. Despite having features similar to Debit Cards, you cannot use ATM cards to pay for goods and services.

• How it works These are issued by banks to withdraw money on the go and are linked to your Savings Account. All withdrawals are immediately deducted from a cardholder's account when there are sufficient funds.
• Perks Since ATM Cards only allow cash withdrawals from your account, you have complete control over your account balance. You are aware of the spending limit, making it easier to live within your means. Depending on the card, you may also be entitled to reward points.
• Security They include built-in electronic strips and chips that hold crucial account holder details. As long as you have your card, there is no worry of unauthorised use. You can report a complaint to block your ATM Card if it gets lost or stolen. The institution will issue a new ATM card at a minimal or zero fee policy.

Today, financial institutions issue ATM cards with a VISA or MASTER Card logo, and these network-connected cards let you withdraw cash and make payments. The amount is deducted automatically from your account.Technological advancements in the financial sector simplify the process of payments and purchases. A single-multipurpose card like this is known as an ATM-cum-Debit Card. When financial institutions allow an emergency overdraw facility on such cards, they fall under the purview of Credit Cards.In other words, despite having an identity of their own, ATM cards have features of both Debit and Credit Cards based on your account.

• Credit cards are like loans on the go. With the right card, you can make timely payments and show creditworthiness to improve your credit limit. Raising your credit score improves your chances of applying for Credit Cards that offer higher limits and better cash-back features. But you must always use a Credit Card wisely.
• ATM Cards serve a specific purpose – access instant cash. Money is debited from your account in real time, and there is no concept of floating funds with this card. Debit Cards also serve as ATM cards, reducing the hassle of carrying multiple cards.
• Debit Cards , like Credit Cards, can be used anywhere to make payments, but with funds you already have.

When deciding between a Debit and Credit Card or an ATM card, remember that it depends on your needs. An ATM card is ideal if you only want to access the money in your account and nothing more. It is also a good idea if you do not want to spend more than you have and live by a budget.Debit cards are a good choice as they allow purchasing flexibility within your budget. It allows you to spend - online and offline - and save within your income limits.Credit Cards offer maximum spending freedom as they allow access to funds you do not currently have. So, you can make big-ticket or urgent purchases as and when needed. However, you must be wary that they carry additional charges and can spiral into debt if you are not careful with how you use the card. Assess your financial stability to pay off your credit before getting a credit card.