Debit Cards and ATM Cards — What’s The Difference

The common attribute of all ATM and debit card transactions is that the transaction is directly linked to the consumer’s bank account—that is, the amount of a transaction is deducted (debited) against the funds in that account.

An ATM transaction typically involves withdrawing cash from an ATM machine. The consumer presents an ATM card, which is issued by the bank holding his or her checking account, at an ATM terminal, which may or may not be owned by the same bank. The consumer enters a personal identification number (PIN) to verify identity, the checking
account is checked for adequate funds, and if everything is satisfactory, cash is issued. All of this is routed across one or more ATM networks.

A debit card transaction involves the purchase of a good or service. In this case, the consumer presents a debit card (which again was issued by the bank holding the checking account) to a merchant, and the consumer either enters a PIN (online debit) or signs a receipt (offline debit) to verify the consumer’s identity. The merchant, in turn, sends information about the transaction across one or more debit card networks, and if the transaction is approved, the consumer receives the good or service and the checking account is correspondingly
debited. The merchant is reimbursed by a credit to its bank account.

An ATM card is typically a dual ATM/debit card that can be used for both ATM and debit card transactions. Many ATM/debit cards offer the consumer both types of debit card transactions, online and offline.
ATM and debit card transactions involve a number of fees. In ATM transactions, the consumer may pay a foreign fee to his or her bank if the ATM used is not owned by his or her bank. The consumer may also pay a surcharge fee to the ATM owner. The issuing bank pays an interchange fee to the ATM owner for the consumer’s use of that ATM and also pays a switch fee to the ATM network for transmitting the transaction information.

In debit card transactions, the bank that issued the card receives an interchange fee from the merchant’s bank and may also receive a PIN fee from the consumer if it is an online transaction. The merchant pays its bank a discount fee. Both the issuing bank and the merchant bank, depending on routing arrangements, pay switch fees. Fees are also paid
to third-party service providers when their services are used.

Tagged as: ATM card, debit card