Unlike credit cards, ATM cards do not allow customers to make payments on purchases, and they provide less protection against fraud, notes Arvest Bank. Additionally, many banks charge fees for withdrawing money from an unaffiliated bank. The potential for theft, loss and malfunction of the card or ATM machine are other disadvantages, according to The Nest.
With no grace period for payments, ATM card users can only spend or withdraw the amount available in their bank accounts. Additionally, some merchants, such as gas stations and hotels, put temporary holds on funds to ensure they are paid for purchases, and the bank subtracts the hold amount from the cardholder's available balance. This sometimes leaves the cardholder short on funds, explains QuickenLoans. If fraudulent transactions occur, the funds come out of the bank account immediately and may be tied up until the bank resolves the issue, according to TheStreet.
ATM cards also typically have less fraud protection than credit cards. Because these cards require a PIN, banks automatically assume that each transaction is valid despite the potential for skimming at ATM machines, notes The Nest. While credit cards generally feature a zero-liability policy for fraudulent use, the card issuer may hold the cardholder responsible for the first $500 of unauthorized use of a debit card, explains Arvest Bank.
Using an ATM card at a dark or secluded location leaves the cardholder open to robbery, while losing the card leaves the cardholder without access to his funds. If an ATM machine malfunctions, it can withhold the cash expected while still debiting the account or keep the card entirely, cutting the customer off from funding until the issue gets resolved, explains Microfinance Opportunities.