What is an ATM Card? – Pros and Cons of ATM Card
Banks today offer banking to their customers through various alternate channels which has virtually brought the bank at the customer’s doorstep or even inside the house..
An important tool in this direction has been cards: credit cards, debit cards, ATM cards, prepaid cards etc. While all of them are similar in one respect they eliminate the need of carrying cash but these cards differ in a lot of aspects and hence serve a variety of purposes.
Often ATM cards and Debit card are used interchangeably for each other and this can cause confusion for customers. All leading banks like ICICI, AXIS and SBI etc offer various types of cards to their customers.
What’s more each broad card category has sub categories so that the customer can pick a card as per his or her choice. We will talk about a few types of cards here and their uses and see how Rohan uses them for various purposes.
ATM cards and Debit cards are similar in their basic function they let your access your savings account any time and any place!
ATM card lets you access your savings account from the ATMs (Automated Teller Machine) and also let you perform a host of non-financial functions by entering your PIN (personal identification number).
The amount that you can withdraw depends on the daily limit of your card type and what is available in your bank account. The card limit varies from bank to bank and from one account to another. The withdrawal is immediately debited from your account.
These are the simplest form of plastic cards issued by banks. These days you will rarely be issued an ATM card by a bank. Though the cards that are linked to a savings account are known as ATM/Debit cards they are actually (functionally) debit cards.
ATM cards are now issued to only a few specific types of accounts and if a customer specifically requests for an ATM card.
Use: Rohan’s wife has a NRO account for which she has been issued an ATM card; she uses the card to withdraw money from her account, check her account balance, order a cheque book etc.
All debit cards are ATM cards but the reverse is not true. This means that debit cards perform the function of an ATM card and additionally they can be swiped at POS to make purchases.
You can distinguish a debit card from an ATM card with the help of the logo on debit cards. Debit cards usually carry a logo from the financial network they belong to like Master or VISA.
These cards can be used at all ATMs or locations where cards from that financial network are accepted. This means that if your card carries a VISA logo you can use it at all places that display the VISA logo (ATMs, restaurants, shops).
Use: Rohan uses his debit card for making online payments and as well as for withdrawing money or other functions like requesting a mini statement etc. He uses his card at ATMs of other banks too!
More reading on debit cards at – Using debit cards in India
These cards as the name suggests have a preloaded with a specified amount; that is you pay first for these cards and use the amount later. They can be compared to prepaid phone connection; you can use only the amount loaded in the card. These cards can be in the form of Gift cards, Forex cards, Meal cards etc.
Use: Rohan uses the Forex Plus Chip card from HDFC on his trips overseas; he does not have to bother about carrying cash or traveler’s cheques.
Difference: For using a prepaid card you do not have to be a bank customer; anybody can buy these cards and discontinue it after the amount is used. In case the customer wants he can get the card reloaded too.
Advantage of ATM Cards Compared to Debit Cards
ATM card has a single but a major advantage when compared to debit cards. In case the card is lost ATM cards prove to be safer. ATM cards can be used to withdraw money only with the help of a pin; Debit cards also have this feature but debit cards can be swiped which makes them vulnerable to huge financial frauds.
Disadvantage of ATM Cards Compared to Debit Cards
The most obvious disadvantage of a ATM card vis-à-vis a debit card is that they can be used only for cash withdrawal and not for swiping. The network where as ATM cards can be used is limited as obviously.
A debit card can be used at all ATMs of the same network (Master Card or a VISA) which while an ATM card can be used at the bank specific ATM only.
Despite not being very common these days the ATM cards are a no frills way to access your account and in case you value safety more than convenience you could get one from your bank.