It’s the Season for Plastic…Debit or Credit?

By moneygodmother

Let’s talk about debit cards…
It’s likely you’ve paid for purchases with a plastic card a time or two. Ever been at a checkout counter and handed the clerk your debit card only to be asked: “debit or credit?” And you’re thinking…”I just handed you a DEBIT card!

While it might not make much difference to you and your debit card, it is a big deal to the retailers and banks/credit unions. It’s all about who pays the processing fees.

So what’s the difference between a “credit” transaction or a “debit” transaction? (Remember we are talking only about debit cards, not using a credit card, which is entirely different.)

When you say “debit”…
• you must enter a PIN (Personal Identification number)
• chances are, the issuing bank/credit union pays the fees
• you can get cash, if you want it

When you say “credit”…
• you will use your signature, not a PIN
• chances are, the retailer pays most of the fees
• you cannot request extra cash
• your bank/credit union may give you an incentive if you make 10 or more credit transactions every month.

What’s the same for both “credit” and “debit” transactions?
• your purchase is immediately deducted from your bank account
• you are protected from theft, according to rules of your bank/credit union
• the retailer processes refunds, exchanges and returns similarly
• unlike a credit card (which is a loan), you do not receive a monthly bill

Now when that checkout clerk asks “debit? or credit?” you’ll know there’s a reason to the question.