3 Key Differences — ATM Card vs. Debit Card vs. Credit Card

By: Linsey Knerl • 9/21/2017

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Having plastic in your wallet is almost a necessity these days. Not only is it convenient to be able to swipe or tap to make a payment for your everyday purchases, but some retailers require it.

Before you acquire your next piece of plastic, it’s important to know that not all card types are created equally. Below we’ll dive more deeply into the differences between ATM, debit, and credit cards — but first, here’s a quick look at the basics:

FeatureATM CardDebit CardCredit Card
Funds connected to bank account:YesYes No
Use anywhere cards are accepted:NoYesYes
Receive a bill and pay later:No NoYes
Charges interest:No NoYes
Affects credit score:No NoYes
Best place to obtain: Ask Your BankAsk Your Bank  See 71 offers  

Now that we’ve covered the basics, let’s dive into the nitty-gritty of each card type. Use these links to jump ahead to a specific card, or keep scrolling to read about all three:

ATM Cards | Debit Cards | Credit Cards

1. ATM Cards: Can Only Be Used at ATMs

This sounds like a no-brainer, but it really is important to realize that this type of card has only one, very specific purpose. It’s used to take out cash, and nothing more!

  • Since the ATM card needs to access cash, it’s tied directly to the checking or savings account at your banking institution. If you don’t have an ATM card yet, it’s wise to ask for one.
  • There’s no way to “float” funds with this type of card. Money is debited in real-time the moment you access the cash.
  • Not a fan of fees? Unfortunately, most cash withdrawals will come with a cost. Sometimes, you can actually incur two fees: one from your financial institution and one from the owner of the ATM machine (if they are not the same).

A debit card can also be used as an ATM card, which we’ll explain in greater detail in the second key difference:

2. Debit Cards: Can Be Used Anywhere, But Require a Deposit

You can enjoy the convenience of paying with a credit card, even if you don’t have access to an actual line of credit like with a credit card, by using a debit card. Here are some important facts to know about debit cards:

  • You’ll need your PIN (Personalized Identification Number) to complete your purchase. This is usually a 4-digit code that you want to make sure to memorize — and don’t ever write it anywhere on your debit card.
  • Debit cards are tied to checking accounts, and you’ll see your funds deducted immediately upon making the purchase.
  • If you don’t have enough cash in your account to cover your purchase, one of two things may happen. Depending on what authorization you’ve given your bank, you may be approved for a purchase to go through, which will be subject to the bank’s discretion and overdraft fees. If you do not have authorization for these purchases to be approved, expect the cashier to let you know that your card has been declined. Another option is to link your card to a checking account that has a savings account for overdraft protection. This may still result in fees, but will guarantee purchases go through, as long as there’s enough in your savings account to roll over.
  • Sometimes, retailers will even allow you to ask for cash back on top of your purchase amount. Check with your bank before doing this, however, as some charge additional fees or will even categorize the purchase as an ATM transaction (resulting in even more fees!)
  • Did you know that you may be able to run your card as a “credit” transaction? By skipping the PIN and running it as credit, you will need to sign for purchases, and charges could take a few days to go through. (This is only available on cards with the Visa or MasterCard logos.)

Though you can run your debit card as credit, you are still using your own money to pay for the purchase, unlike a credit card where you’re using the bank-issued line of credit, which we’ll help explain in the third key difference.

3. Credit Cards: Can Be Used Anywhere, And Are Like Loans

While credit cards appear very much like debit cards and ATM cards, they have a very different impact on your bottom line.

  • Credit cards, unlike most debit or ATM cards, are the same as taking out a loan and require a bank or lending institution to review an application and approve you for creditworthiness. If you would have a hard time getting a loan, you may not be able to get a credit card.
  • Just the act of applying for a credit card can affect your credit. When the financial institution pulls your credit report, your score can take a small, temporary hit. Too many applications can have a significantly negative outcome for your credit history.
  • Having the right card, however, can set you up with the opportunity to make payments on time, increase your limits, and show creditworthiness. All of these will raise your score and make you eligible for even bigger and better card offers.
  • There are added consumer protections that credit card holders may qualify for, including extended warranties and travel insurance. They also offer the best protection against fraud, and you will find credit card companies to be very helpful if you ever have to dispute a charge based on faulty or unacceptable service or product performance.
  • While some banks are starting to offer small cash-back rewards for debit card usage, credit cards are still mostly responsible for the best perks and offers. Cash-back, frequent flyer miles, hotel stays, and big discounts can be given for responsible purchases and on-time payments.

Here are some of our expert’s top choices for credit cards with the best perks:

+See More of Our Favorite Rewards Cards

Before you go thinking that you could not possibly qualify for a credit card, it’s wise to check cards that are specific to your level of creditworthiness. Everyone has to start somewhere, and there are now credit cards available for all levels of credit, including no/limited credit, bad credit (<640), good credit (640-720), and excellent credit (720+).

How to Determine Which is Right for You

Deciding whether to get an ATM, debit, or credit card is a very personal decision that will be made by looking at your own needs for purchases. If you will simply need to take cash from your own account, an ATM card will likely do. Flexibility with purchases at most retailers will require at least a debit card. For those who need access to additional funds, credit cards are the only way to go. As each has its own perks – and responsibilities – it’s best to be honest about what you want, but also what you can handle.

Editorial Note: Opinions expressed here are the author's alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

About the Author

Linsey Knerl

Linsey is a finance blogger, author and public speaker with a passion for helping everyday families earn more and live better. In addition to covering the credit card industry in depth on CardRates, she shares her expertise for parents who want to start budget-friendly businesses from home at 1099Mom.com.