Are ATM Credit Cards Worth Having?
By Jill Terry
aren't the only items that shouldn't be judged by their covers.
Credit cards, too, often have more to them than is visible
on their shiny plastic faces.
More and more banks are issuing ATM cards with Visa or MasterCard
symbols on them. As a bank customer, you're told that you
may use the ATM card just like a credit card. So far, so good.
But is this card a credit card?
Traditional Credit Cards
Credit cards earned their name because purchases were made
on what was known as "time." You were given possession of
the merchandise because you promised that, in time, you would
pay for it. If you buy a dress today and charge it on your
MasterCard, you have until the due date on your billing statement
to come up with a payment. And you only have to pay a fraction
of the total amount you've charged (as long as you're not
averse to interest and finance charges), otherwise known as
a minimum payment. This is known as revolving credit.
Creditors--the companies that issue the cards and collect
your payments--report your payment history to credit bureaus.
So, as you use credit cards, you build a credit history.
With most credit cards (American Express notwithstanding),
you're given a pre-set limit. That limit is the highest
dollar amount that your account can carry at any given point
in time. It isn't a daily limit, but rather an overall ceiling
on how much total debt you are allowed to owe the creditor.
If your credit cards are stolen and used by someone without
your permission or knowledge, credit laws (specifically
Regulation Z, Truth-in-Lending) protect you from liability
for anything over $50 that you didn't charge.
ATM Credit Cards
If you make a purchase with your ATM credit card, the merchant
is paid right away with funds from your checking account.
You never receive a bill because you've paid for the merchandise
at the time of purchase. The transaction you made is essentially
a cash transaction.
So, why is there a Visa or MasterCard symbol on your card
if it's not a credit card? Because the transaction takes place
within the Visa or MasterCard processing system. They supply
the technology to facilitate the electronic movement of funds
from one account (yours) to another (the merchant's).
ATM credit card transactions have buyers and sellers but
no creditors--which means that no credit reporting
takes place. Consequently, the ATM credit card you use so
frequently--in the belief that it's helping to build your
credit rating--is doing nothing of the sort.
You might also believe that the amount in your checking account
determines your limit on any given day. Unfortunately, you'd
be wrong here, too. Banks typically impose a daily limit on
the amount available through your card and that limit is likely
to be the same as your ATM withdrawal limit. (There are exceptions
to this--ask your bank to explain how it determines your limit.)
Consider the case of a consumer who orders a computer online
using her ATM credit card. The total cost is $2200. She is
declined, despite the fact that she has more than $2200 deposited
in her account, because the bank only permits $400 per day
to be withdrawn from her account through her ATM card.
And finally, because ATM credit cards don't meet the legal
definition of revolving credit, you have no protection in
the event that your card is lost or stolen. Until Congress
passes banking legislation that's responsive to the unique
features of ATM credit cards, you should use and safeguard
your card as if it were cash. If using credit online makes
you uneasy, you might not want to use your ATM credit card--should
hackers get hold of your account number, you have neither
recourse nor legal protections. Until you close the account,
a thief can withdraw the full amount of your daily limit (and
All things considered, if you're willing to keep purchase
amounts low and risk the having your card stolen or misused,
ATM credit cards are a convenient way to live within your
means without having to write or carry checks. Just don't
be fooled into thinking they're credit cards.