What On Earth is the Difference Between the Debit and Credit Options At Checkout?
When I go to any store and use my debit card to make a purchase, I have to make the decision between credit or debit. Some people have told me to never use debit and others have told me to never use credit. I’ve never heard a good reason why to use one over the other. I have tried both,and the only difference seemed to be that with credit I have to sign a receipt but with debit I have to enter my PIN. Whatever I’m buying, be it food, gas, or a personal Bouncy Castle, both methods of payment work just as well. The money gets taken from my account and everybody goes home happy.
Before I describe the nuts-and-bolts of credit versus debit transactions, I’ll clear up some misunderstandings I think are easy to make. Even though it’s called a “debit” card, the money is taken out of your account regardless of which button you press. The “credit” button doesn’t provide you with any money, nor does it help you to build credit. The differences between the two buttons are more subtle, and I’ll describe them now.
The biggest difference between the two are the associated fees, and the bank that issues the debit card cares which button you choose.. When you use a debit card and choose “credit”, the merchant pays higher fees to your bank than if you chose “debit” and entered your PIN.Because they get higher fees when you select “credit”, some banks have incentive programs to encourage you to use this option instead of “debit”. They’ll give you rewards like airline miles and discounts at restaurants and even 1-2% cash back on purchases. If you have a debit card that offers rewards, as many of the major banks do, you will not get them if you select “debit”. The bank won’t make as much money from your choice so they don’t think you deserve to be rewarded!
It might sound like I have nothing good to say about the “debit” option, but in fact, I do. There are two good reasons to hit the “debit” button instead of “credit”. First, if there isn’t an ATM nearby and you need cash, hitting “debit” is the only way to get cash-back. This type of cash-back is when a cashier gives you money from the register that you paid for with a “debit” transaction. The 1-2% cash back that I mentioned earlier is not actually cash – the bank just deposits this amount into your account as a reward for using “credit”. So think of the “debit” cash-back as being an ATM transaction that isn’t at an ATM or even at your bank. You swipe your card and enter your PIN number and the cashier gives you money from the register. The second reason to choose “debit” over “credit” is that the transaction will post to your account immediately. If you use internet banking from a computer or phone, your balance will be much more accurate if you consistently choose “debit” over “credit”.
After doing all this research, I still can’t recommend using either the “credit” or “debit” buttons more often. I will probably choose “debit” because I don’t have rewards on my debit card, and I like my internet banking balance to update as quickly as possible. But if your card gives you rewards or you don’t want to type in your PIN in public, I would say that the “credit” button is your best bet.
Share on Facebook