Debit or Credit? Check out the Difference it Makes at Checkout.

It’s the most frequently asked question at the checkout line. And it’s not “Paper or plastic?” or even “Do you want fries with that?” It’s one that gets posed the moment you reach into your wallet and pull out your debit card:

Will that be a credit or debit?

Many people just fire off a quick answer without even realizing that there’s a difference between the two options. They may be thinking it doesn’t matter because the money to fund the purchase comes from the same place – their own pockets – or more specifically, their bank accounts.

But, there really is a difference between using your debit card for a credit purchase versus a debit purchase. And because both involve your money, it’s probably not a bad idea for you to know that difference. Consider this:

  • Using your debit card for a credit transaction. Using your debit card in this way is a little confusing. After all, it’s not really a credit card if you’re using your debit card and the money is coming from your bank account, right? Well, the reason it’s called a “credit” is because your transaction is processed by the same payment network as credit cards – MasterCard or VISA. It’s why, when you select the credit option, you are asked to sign the receipt or the screen, just as  you’d do if you paid by credit card.

Because these transactions are processed in this way, credit purchases made with your debit card are considered offline purchases, which have to be approved. So in essence, making a credit transaction with your debit card is like writing a check, which is why credit transactions made with your debit card are not immediately deducted from your account balance.

  • Using your debit card for a debit transaction. In contrast, when you choose to pay by debit, the funds are processed through the ATM network, which is why you are asked to enter your Personal Identification Number (PIN) on the keypad. For this reason, debit transactions are considered online transactions and as a result, the funds are automatically deducted from your account balance immediately. Making a debit purchase is similar to making a withdrawal at the ATM.

And the Payment Answer for You Is…

The decision about whether to use your card for a debit or credit transaction really depends on your comfort level. Credit transactions offer an added level of protection – Zero Liability policies from MasterCard or VISA. That means if someone uses your card to make an unauthorized credit purchase, you are not liable if you report it within a specified timeframe. Debit transactions do offer protection, but if someone gets ahold of your card and uses your PIN to make a purchase, you may have more difficulty getting your money back.

Another thing to keep in mind; credit transactions are more profitable for banks. As a result, they may offer incentives to get you to make them, such as cash back for signature-based purchases or waivers on checking fees. So, there may be added incentives to choose “credit” at the checkout line.

So now that you know the difference, that debit or credit question at checkout just got a little easier. As for those other pressing questions – “Do you want fries with that?” — you’re on your own.

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Vince Liuzzi serves as Executive Vice President and Chief Banking Officer at DNB First.


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