Debit or credit?

The real difference revealed

Choosing to use credit or debit can make a difference for some transactions.

Choosing to use credit or debit can make a difference for some transactions.

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” transactions are not true credit; payments do not become part of a revolving account, as a regular credit card transaction would. There is no interest and no monthly payments. In this way, “credit” and “debit” charges on your ATM/debit card are largely interchangeable, and in most cases either choice is perfectly acceptable.

There are a few differences between the two, however:


• You want cash back. If your shopping
day isn’t even half over and you don’t
have the cash for a triple latte, this is the
choice for you.
• Your transaction is small. ATM/debit
cards carry a limit on purchases and withdrawals. If you’re purchasing a big-ticket
item, you may exceed your daily spending

limit—or send the remainder of the
day’s transactions into limbo.
• Your account is flush. Debit purchases
are instantly taken out of your account,
just like an ATM transaction.


• You want increased fraud protection. VISA and MasterCard have zero
liability policies on debit card purchases

that are processed as “credit,” meaning
you have signed for your purchase rather
than punching in a PIN.
• Your purchase is big. Because of smaller
limits imposed when using PIN transactions, larger purchases are more likely to
be authorized using signature debit. Keep
in mind that there are still limits to the
“credit” side of an ATM/Debit card; it’s
best to confirm this limit prior making
that big-ticket item purchase.
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 to the purchase of price of
any item can turn the best bargain into a
splurge. Happy shopping!

Trina Hoff is the President/CEO of Northern Communities Credit Union.

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