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What is the Difference Between Debit and Credit When I Use my Bank Card?

Mary McMahon
Updated May 16, 2024
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When you use a bank card in a store, you are often offered the option of using it as a debit or credit card. The main difference is what network the transaction is processed through. It is important to remember that in either case, the funds are taken directly from your account; using your bank card as a credit card does not magically create a line of credit.

The primary difference between debit and credit is in the way that the transactions are processed. When you run your bank card as a debit card, you will be asked to enter a personal identity number (PIN), and the funds are removed from your account instantly. When you select a credit option, the transaction is verified with your signature, and the funds may not be removed from your account right away, depending on how the store processes its credit card transactions. Many do what is known as "batching," meaning that all of the credit transactions are run in a batch, typically at the end of the day, and it may take a day or so for your credit transaction to clear.

From the point of view of the merchant, the difference between credit and debit is typically a fee. Smaller companies may be charged more for card transactions run as credit, so if you are visiting a small, locally-owned business, you may want to consider selecting the debit option as a courtesy. This difference between debit and credit may not be important to you, and it doesn't apply to all merchants, but it can help save money for smaller stores.

Some debit card issuers promise stronger protections if you use your card as credit rather than debit. These issuers may lower your liability or include fraud monitoring or other services for "credit" purchases. Such protections may be at the discretion of the issuer, however, and may not be included with all cards. It's important to remember that just because you sign for a debit purchase rather than entering your PIN does not mean that you're covered by the same laws which protect credit card users.

There can also be a difference between debit and credit if you have a card that awards you points or rewards. In many cases, only purchases processed as "credit" will earn you rewards; anything you buy using your PIN probably won't qualify. Such rewards usually come from the credit card company that issues the card, so you'll only get points for transactions that go through their networks.

You can typically only get cash back with your purchase if you use the debit option, which can be a big difference between debit and credit for some people. Using your debit card to get cash at the store rather than at an ATM usually means that you won't have to pay any additional fees. Some banks do charge fees for all PIN purchases, however, so you may end up paying extra anyway.

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Mary McMahon
By Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a SmartCapitalMind researcher and writer. Mary has a liberal arts degree from Goddard College and spends her free time reading, cooking, and exploring the great outdoors.

Discussion Comments
By anon74169 — On Mar 31, 2010

Well, as far as I know, credit cards (or a debit card used as a credit card) will charge the merchants a percentage of the sale. Usually, this fee ranges from 3 to 5 percent). The bank itself will charge $0.35 per transaction. Therefore, the break-even point comes in around $10.00.

You will notice that small businesses often prefer that you use debit for a higher amount and credit for lower amounts. Sometimes, I even play with it. Recently, I asked for a discount on a car repair if I paid with debit, it worked!

Now, please don't try to pay with debit at a 99-cents store.

By anon68173 — On Mar 01, 2010

anon42618: Some stores do not require a PIN or signature if the final purchase is under a certain dollar amount. The pet store in my town is that way-they don't need a signature/PIN if the amount is under $20. If you are curious about your 99-cent store in particular, try asking the cashier-that's how I found out at my pet store. If he/she doesn't know, the manager certainly will.

By anon42618 — On Aug 22, 2009

What about companies who don't ask for signature or pin number when using a bank credit card or even a regular credit card. Our 99-cent store is one such store.

By anon39136 — On Jul 30, 2009

That is terrific add-on advice. Thanks, bananas.

By bananas — On Sep 30, 2008

There is one store where i shop occasionally that does not accept credit cards, so if i do not have enough cash on me, i use my debit card. However, everywhere else, I use a credit card for various reasons.

When I use my debit card i get charged a small fee, and the money is removed from my account immediately. I therefore prefer to use a credit card, where the transaction is free, and I get a small percentage of the purchase back.

My money is in the bank in the meantime earning interest. On top of that I have time to pay off the bill at the end of the month. For maximum benefit, it is important to pay the whole bill, every month.

Mary McMahon
Mary McMahon

Ever since she began contributing to the site several years ago, Mary has embraced the exciting challenge of being a...

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