ATMs and debit cards: Convenience -- and confusion Banking Center

Here, there and everywhere. It seems as if those cash-dispensing machines that made their debut three decades ago have become nearly omnipresent. Besides being at banks, some of which have two -- one for walk-up customers, another for drive-through -- ATMs can be found in grocery stores, gas stations, shopping malls, casinos, cruise ships, nightclubs, 7-Eleven stores, aboard Navy ships, you name it. With more than 800,000 machines worldwide, ATMs have made cold cash just seconds away, 24 hours a day, seven days a week, around the globe. Some of us wonder how we ever lived without them. Others are still trying to figure out how to live with them. Between all the changes and charges that have become associated with using the machines, it's no wonder many bank customers are confused. Here are some basics to help you understand how ATMs and debit cards work. ATMs allow you to do a number of banking functions -- such as withdrawing cash from your account, making balance inquiries and transferring money from one account to another -- using a plastic, magnetic-strip card and personal identification number issued by your financial institution. Many banks have upgraded their ATM cards to include a debit feature, enabling you to use the card as an alternative to carrying a checkbook or cash to pay for merchandise and services. There are two types of debit cards and two types of debit card transactions: Direct debit cards allow only "on-line" transactions, also called point-of-sale. An on-line transaction works like a straight ATM transaction. It is an immediate electronic transfer of money from your bank account to the merchant's account. This requires you to enter your PIN at the store's terminal. The system checks your account to see if there is enough money to cover the purchase. A deferred debit card looks similar to a credit card, bearing a Visa or MasterCard logo, and can be used wherever your card's brand name is displayed. It is NOT a credit card. Rather, this card allows "off-line" transactions, as well as on-line. Off-line purchases resemble a credit card transaction. The merchant's terminal reads your card and creates a debit against your account. However, instead of debiting your account immediately, the transaction is stored for processing later -- usually within two to three days. Instead of using a PIN number, the customer signs a receipt as they would with a credit card. Most off-line transactions are still verified immediately to see whether there is enough money in the account. Regardless of the type of debit card you have, when you use it, the money is subtracted from your bank account. Debit cards allow you to spend only what is in your account, and purchases should be kept track of just as if you're writing a check. Some banks give customers separate cards for ATM and on-line transactions, and another for off-line transactions. If your card handles both types -- and a merchant accepts both -- you can choose the type of transaction you want when you use the card. If you choose "debit" on the merchant's terminal and swipe your card through, the transaction will be done on-line and you will be asked for your PIN. If you choose "credit" and swipe your card, the transaction will be off-line and you must sign a sales slip. Thinking about an Auto Loan? Home Equity? Any bank product? We give you unbiased rates for your area at bankrate.com.