As our world becomes increasingly cashless, consumers rely more on credit and debit cards to make transactions. According to an article published by Alliant Credit Union, a 2020 study showed that 38% of payments were made with a credit card, while 28% had a debit card, followed by cash. Knowing some of the limitations and regulations while using credit and debit cards is essential. Card limitations and regulations while using credit and debit cards are essential. Card limitations are an anti-fraud measure to protect you in case your card is lost or stolen.
Credit Limit
A credit limit is the maximum amount a cardholder can spend using a credit card. A credit card issuer will review several factors to determine the credit limit. Your credit limit is typically based on your credit history and score. Factors such as payment history, length of credit history, credit utilization, credit mix, and recent inquiries will impact your card limit.
Your credit limit isn’t set in stone. A credit card issuer may automatically increase the credit limit on your card for various reasons, such as if your credit has improved, your income has increased, or if they want to retain you as a customer. A higher credit limit may or may not be positive, depending on your financial situation.
Credit Card Daily Limit
Credit cards have a daily spending limit typically lower than your card’s overall credit limit. Card issuers may also have a daily credit card transaction limit as a fraud prevention measure. If you plan on making a large purchase or multiple large transactions, you should notify your card issuer in advance to avoid possible interruptions.
Cash Advance Limit
A credit card cash advance allows you to access your credit line to get cash when needed. It’s essentially a loan granted to you by your credit card issuer. Cash advances are made at an ATM using the card issuer’s personal identification number (PIN). Your credit card issuer may also provide you with convenience checks. Convenience checks are linked to your credit card account and, like a regular check, can be written to a particular person or organization. Most financial institutions also offer cash advances in person with a valid ID.
Credit card cash advances are an expensive way to access cash. Besides the actual advance, there are costs associated with the cash advance, typically a 5% fee of the cash advance amount plus the ATM fee. The interest rate on a cash advance generally is higher than the interest rate for purchases made with a credit card. Interest on a cash advance starts to accrue as soon as the advance is made, whereas purchases allow a grace period before interest accrues.
Debit Card Limits
The fundamental difference between credit and debit cards is where the money is pulled from. Credit card transactions are charged to your credit line. In contrast, a debit card is linked directly to your checking account and draws money for purchases or ATM withdrawals.
ATM Withdrawal Limit
ATMs provide an easy way to quickly access your money without visiting a branch. All financial institutions place a daily ATM withdrawal limit for security and practical reasons. These limits prevent thieves from withdrawing all your money if they gain access to your card. Plus, ATMs can only hold a limited supply of cash, and a limit on your debit card will help prevent the machine from running out of money.
There is no standard daily ATM withdrawal limit, as each financial institution establishes its policies. Generally, ATM cash withdrawal limits range from $300 to $1,000 per day. In addition, some ATMs can limit the amount of cash dispensed per withdrawal. While ATM withdrawal limits can seem like a nuisance, they help serve a purpose in keeping your money safe.
Daily Spending Limit
With a debit card, your financial institution sets a daily spending limit to ensure your money is safe. Debit card limits help protect your account from fraudulent activity by preventing sudden, excessive purchases in person or online. Keeping your daily spending limit at an appropriate level can help reduce the amount of money a thief could steal daily.
Your debit card may be declined if you try to spend more than the spending limit. However, some financial institutions may be able to increase your debit card’s daily spending limit. Contact your financial institution to see if that option is available.
Final Thoughts
Credit and debit cards are easy and convenient ways to purchase in-store or online, with different benefits and drawbacks. Credit cards allow you to borrow money from the card issuer up to a specific limit to purchase items or withdraw cash, and debit cards are linked directly to your checking account.
It is essential to know your credit and debit card limits. The credit limit for credit cards is the maximum amount of money you can spend. Managing your limit responsibly helps build your credit score and can affect your ability to get financing on more essential items like a home or car. Although debit cards don’t have annual fees, you may pay other fees to have a checking account. Those fees may include monthly maintenance fees, overdraft fees if you overspend, returned item fees, and ATM fees if using your debit card at another financial institution’s machine.
HFS Credit & Debit Cards
At HFS, we offer two great credit cards that best fit your lifestyle. If you’re looking for a way to start building credit or a great everyday card, the HFS Visa Platinum® Credit Card could be for you. If you want to earn splendidly when you spend, the HFS Visa Signature® Credit Card is perfect. Plus, monitor your spending limits and card controls at your fingertips with the HFS Cards App. For more information, visit our website to learn about these two great credit card programs.
If a credit card is not for you, our HFS Visa® Debit Card gives you instant access to your checking account funds. Our HFS Cards App lets you control debit card usage and spending on the go. Both debit and credit cards can be issued instantly in the branch, so you have a working card immediately! No more waiting for one in the mail. For more information, visit our website to learn about our debit card. Please contact us today if you have any other questions about these products.
