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By Maggie Tomasek
In a 2018 survey by payment processor TSYS, 86 percent of respondents said their preferred payment method is a debit card or credit card.
As our world becomes increasingly cashless and we rely more on debit cards and credit cards to make transactions – whether with the physical cards or through payment apps and mobile wallets – it’s important to know about some of the limitations and regulations that come along with debit and credit cards.
Card limitations are an anti-fraud measure; in case your card is stolen, the thief could only charge a certain amount each day until the theft is reported.
Debit cards: The bank or credit union that issues your debit card will set your daily spending maximum. If you try to spend more than the maximum allowed, your debit card will be declined, even if you have enough money in your checking account. Your limit is based upon the length of time you’ve been a customer and the balances you keep in your accounts. Typically new members (under 30 days) and teen checking accounts have lower spending limits. Sometimes, financial institutions will also set different limits based on the type of debit card transaction (i.e. a PIN purchase vs. a signature purchase). Most long-standing Alliant members have daily limits up to $2,000 for PIN purchases and $2,000 for signature purchases.
Credit cards: You might also have a daily spending limit on your credit card that is lower than your card’s credit limit. Similarly, you could be limited to a certain number of transactions per day as a fraud prevention measure. Pro tip: If you're planning to make a large purchase or make more transactions in a day than usual, call your credit card issuer and let them know in advance.
Also, remember that that your credit card spending also affects your credit utilization ratio (your credit limit divided by your balance). Ideally, you want to keep that ratio below 50 percent – 30 percent or lower is even better – or it could negatively impact your credit score.
Debit cards: Once again, your bank or credit union will set your daily ATM withdrawal limit, and these limits can vary significantly between financial institutions. (Alliant’s daily ATM withdrawal limit is $1,000 and $100 for teen accounts.) Be aware that ATM fees can count toward your total daily withdrawal as well. So, if you’re trying to make a $1,000 cash withdrawal at an out-of-network ATM that charges a $3 fee, your transaction could be declined, even if Alliant is rebating the fee later that night. Also, the ATM owner could impose further limits, so the machine doesn’t run out of money too quickly.
Credit cards: Similarly, credit cards have a cash advance limit, which is the maximum amount of cash that may be advanced against a credit card’s balance. Your cash advance limit will be much lower than your overall credit limit. It’s usually set as a proportion of your credit limit, so if your credit limit changes, your cash advance limit would change as well. Cash advances should really only be used in emergencies because they come with a higher APR than your regular credit card balance and banks often charge cash advance fees in addition to ATM fees. It’s important to note that currency purchases – such as foreign, cryptocurrency and stocks – are also considered cash advances.
Additionally, during times of processing outages, your typical card limits may be reduced for a short period of time. Each financial institution and credit card issuer has different policies in place when it comes to spending and withdrawal limits for debit cards and credit cards. Look at your account agreements or call your financial institution to find out those limits so you can plan ahead and avoid any roadblocks.
Maggie Tomasek is the PR and Content Strategist at Alliant. She began her career as a journalist for newspapers in Utica, N.Y., Des Moines and Cincinnati before moving to Chicago in 2009. Maggie is an eight-time Chicago Marathon finisher and a lifelong creative writer with a passion for comedy. Her mom instilled in her a great sense of fiscal responsibility, and her big sister told her to throw that responsibility out the window every once in a while in the name of life experience. So far, that combination of financial advice has worked out pretty well for her.