Debit Card vs. Credit Card

Debit cards and credit cards are popular ways for consumers to pay merchants at most stores. If you use your bank card with Visa or Mastercard logo at a card processing terminal it will ask you whether you want to run the card as debit or credit. When it comes to debit card vs. credit card transactions, there are both similarities and differences. It is important for consumers to understand that a line of credit cannot be created by choosing the credit option if one is not already in place.

Banks issue what are commonly called check cards to consumers with checking accounts. These cards do feature a major credit card logo and look like a credit card, some may say Debit on the front. However they can be processed in the same manner as a credit card, the difference is the money is taken out of your checking account right away.

If you choose debit as your payment method, you will need to enter your PIN number using the keypad on the machine where you swiped your card. PIN stands for personal identification number and is usually a 4-digit number. Once the transaction goes through the money is gone from your account and you will get a receipt that you will not need to sign as you would with a credit card transaction. If there are insufficient funds to cover the transaction your debit card will not be approved.

Using your card as credit means the funds will be taken from your credit account. This may not happen instantly because some stores process all the credit card transactions at once, usually at the close of business. It can actually take a few days for a credit card transaction to complete. So, you may want to keep a ledger of your credit card transactions to maintain an accurate account balance. Using your debit card as a credit card takes the money right from your checking account as mentioned previously.

Debit card transactions may have a limit each day. This means if you are spending over a certain amount of money using the card as a credit card may be a better idea. Also, if your card is stolen and used as a credit card, you can call and report the theft and you will not have to pay for the fraudulent costs. Debit cards may have less protection against theft and fraud. Credit card companies have mediation procedures as well to deal with disputes between you and merchants if the arise.

A debit vs. credit card is different for the merchants who accept these payment methods. In some cases, small businesses may not be charged as much by their merchant account providers for taking debit cards. So, if you wanted to be courteous to the store it would charge the owner less if you used the debit option. This isn’t always the case, sometimes it costs the same amount for the store to take debit and credit cards. Either way, they are making money off the transaction.

When making the decision of debit card vs credit card, these are all things you may want to consider before choosing a payment method. Some consumers have personal preferences when it comes to how they like to use their card. If you are used to running it a certain way and that works for you, there is probably no need to change what you are doing unless you are making a large purchase or shopping at a particular merchant where you’d prefer using your card as debit when you usually choose credit or vice versa.

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