There are a number of different kinds of bank cards a person may come across in the course of their financial life – ATM cards, debit cards, credit cards, and prepaid debit cards.
All of these, as one may gather, work differently – and how they differ is an important thing to know in order to wisely use each kind of card.
The Different Bank Cards You Might See
These kinds of cards are typically issued by a bank, which aim to provide their customers a greater sense of flexibility in their banking hours. (If you can believe it, there was once a time when you had to go to a bank teller to get cash!)
For the most part, a customer can use their ATM card to make deposits, withdraw money, transfer money between their accounts, get a cash advance, check an account balance, or even make a loan payment at any given convenient time, day or night. All of this would be done at an ATM.
Make sure an ATM you use is within your bank’s network or you could be hit with ATM fees.
These kinds of cards, also issued by a bank, generally combine the uses of an ATM card and a check, in that using a debit card to make a purchase will result in the funds immediately being withdrawn from the bank account. With a debit card you can make either a PIN transaction (where you enter your PIN code) or a signature transaction (where you sign for the purchase).
You may notice that these cards are backed by either Visa or Mastercard (this is what allows you to make a signature transaction). Debit card users need to watch that they don’t overdraw (overspend) on their account as there could be steep penalties. Debit cards retain the same functions as previously outlined for ATM cards.
These kinds of cards work in a straightforward manner. There is no bank account from which money is deducted, though there is a limit to how much a person can spend before paying it off.
Basically, the credit is a loan being given to the user of the card. Generally, the company that issues the card requires a minimum payment on the bill per month and requires, in exchange, a person pay interest on the owed balance, which can be as high as 29% per year. If you pay it off in full there is no interest. Credit cards can be very useful but the fact that the money isn’t being drawn from an account can easily lead people to overspend and get into credit card debt.
Prepaid Debit Cards
These are generally accepted as credit cards and are a good option for those with poor credit because, unlike a credit card, it does not require a credit check for approval.
A predetermined amount of money is put into the card balance and can be spent just like any other debit or credit card, until the money runs out. At that point, it must be refilled with more money before it can be used again.
A prepaid debit card can be a great way to keep on budget as you can only spend what’s on the card. The drawback, of course, is you are limited to the amount on the card and you must keep track of the balance.
A consumer these days most likely has a number of different bank cards they carry with them daily. Its important to understand how each works and which card is best for your spending needs.