Debit or Credit? The Real Difference

We’ve all been there: you’re at the register paying for that long-coveted purchase. You swipe your ATM/debit card and the touch screen asks, “Credit or Debit?” If you’re like most people, you make a choice without investing too much brainpower, but do you really know the difference between one choice and another? When is credit better than debit—and the other way around?

If you’re paying with your ATM/debit card, one thing is always the same: any credit or debit transaction you make will result in money coming directly out of your checking account. “Credit” transaction – meaning you have signed for your purchase rather than punching in a PIN – are not true credit; payments do not become part of a revolving account as a regular credit card transaction would. In this way, credit and debit charges on your ATM/debit card are largely interchangeable, and in most cases either choice is perfectly acceptable.

Bear in mind that some retailers charge a fee for either one or both “credit” and “debit” services. To avoid excess fees and unwelcome surprises, ask the retailer what fees may apply prior to making a choice between debit and credit. You’ll also avoid excess fees by making sure you have adequate funds to cover any and all purchases you make, credit or debit, before you hit “enter.” Adding an overdraft charge too the purchase of price of any item can turn the best bargain into a splurge.

You can minimize your potential losses for unauthorized use by using reasonable care in safeguarding your card from
loss or theft, never giving anyone your PIN, and promptly reporting the loss or theft your card to the issuer. Other safety tips to remember: Never enter your card number when using a public Wi-Fi system, only use trusted websites for online purchases and be observant when using an ATM and do not use if you notice anything usual about the card reader.