Most debit cards will double up as ATM cards, however they work in quite different ways even though they are often on the same card.

Nearly every one has a debit card these days. Those little plastic cards that are linked to your bank account. When you use a debit card at an ATM (or a merchant), it’s basically you saying that you are authorising the withdrawal of money from your account.

How an ATM withdrawal works

We all take these interactions for granted. But what actually happens when you withdraw cash from an ATM.

1. You insert your debit card into the ATM slot and enter your PIN  The ATM reads the information on the magnetic strip or chip on your card and verifies your identity with your bank.
2. You select the amount of cash you want to withdraw and the account you want to withdraw from. The ATM then checks if you have enough money in your account to cover the withdrawal. If you don’t, it may decline the transaction or allow you to overdraw your account with a fee.
3. The ATM software will then send the request to your bank to debit the amount you requested from your account. If successful it will then appear as a credit to the ATM operator’s account. This is all done through an electronic network that interconnects banks and ATMs together. There’s a fee involved by the network which you may have to pay.
4. Your bank will approve or reject the request and then send a response back to the ATM. If your request is approved, your bank updates your account balance and records the transaction on your statement.
5. The ATM will then spit out your cash and if you’ve asked for one, prints the receipt. It also updates its own cash balance and records all the details of the transaction in its database.
6. Take your cash, card and receipt if requested, and leave the ATM.

The reason that you can use a debit card at a conventional ATM is solely because it’s linked to your bank account. An ATM uses the same networks as EFTPOS to communicate with the banks. But it’s important to note a few differences in how EFTPOS works vs Visa/Mastercard.

EFTPOS and Visa/Mastercard Transactions

EFTPOS stands for Electronic Funds Transfer at Point Of Sale and is the payment system that we use in Australia that allows you to use your debit card at retailers. You can choose either cheque or savings account by pressing CHQ or SAV .

On the other hand, Visa and Mastercard are international payment networks. They’re networks allow you to use your card basically anywhere. The main difference here is that you you can pay from your credit account by pressing CR on the terminal.

And because they card is linked to a bank account, you can use that same debit card to withdraw cash at ATMs. You’ll probably be charged a fee, more often than not by the ATM operator.

So, ATMs work by using a combination of magnetic stripes, PINs and networks to verify your identity and access your bank account. If everything checks out, you get your money.

Using your debit card at an ATM is a convenient and secure way to access cash. If you have any questions or concerns about your debit card or ATM transactions, you can always contact your bank for assistance.