Bank Cards: Should You Use Them as a Debit or Credit Card?

Almost every time you make a purchase with your bank card you are asked the question “Is this debit or credit?” What does that mean and why does the cashier ask you this question? The way you answer could have a big impact on your finances.

When you use your debit card, you have the option of having the store’s cashier have your card authorized as a debit card or credit card. Either option will work for you; the bank will remove the appropriate amount of money from your account based upon your transaction. However, there are some differences going on behind the scenes in each type of transaction.

If you opt to use your card as a debit card, you will be prompted to enter your PIN (personal identification number). This interaction offers the merchant an additional layer of confidence that you are the authorized user of your debit card although that security does little to affect your side of the transaction. Merchants often pay their credit card processor lower fees for transactions using debit cards than they do for transactions using credit cards.

No entry of your PIN is required when you use your bank card as a credit card. Your purchase is instead authorized by the Visa or Mastercard system. After the transaction is approved, you simply need to sign your receipt to complete the process.

Aside from the processing going on in the background of your transaction, debit and credit card transactions offer different benefits to cardholders. Debit card users can expect to have the convenience of using their debit card to pay for transactions and withdraw cash from their account at the same time. Cardholders just need to select the “cash back” option when they check out.

Alternatively, credit card users can expect to receive certain perks on their purchases that are a part of shopping with Mastercard or Visa. Mediation with retailers when purchases go awry and fraud protection are common benefits.

All things considered, most cardholders are better served by using their bank cards as debit cards. They can rest assured, then, that the requirement of a PIN will help protect them from identity theft. They can also enjoy cash back privileges. However, while traveling away from home or making very large purchases, cardholders may prefer the protection of Visa or Mastercard benefits.

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