The Difference Between Selecting Credit vs. Debit at Checkout

Self-check, Fast Lane, or Register 4? Insert or Swipe? Credit or Debit? All of these questions play a role in our shopping experiences each day. We don’t think about them much but as times change and technology continues to advance we will continuously be faced with new payment options and methods as consumers. This week I’d like to reflect on how these split second decisions can affect our shopping experience and what you should know about the consequences of each decision.

Breaking Down the Options

There are three questions I mentioned above that aren’t just rhetorical. The first deals with time. Do you want to put in the effort yourself, bag your own groceries, and possibly save time in the long run? Or do you want someone to do that work for you while you stand in line behind people with full carts? What is your time worth and what are you trying to get out of the shopping experience?

The second deals with security. Many large retailers have updated their systems with the chip technology (reference the Target and Home Depot credit card hacks a few years ago). Chip technology? You know, that annoying new process, where you insert your card at checkout instead of swiping it? Unfortunately there are also quite a few retailers where chip technology isn't setup yet. Luckily this doesn’t have much impact on consumers, minus those awkward moments where you swiped instead of inserted your card, or vice versa.

The third and final question from above affects your security, your future spending, and your time. Credit or Debit? Which are you supposed to choose? You probably have both types of cards in your wallet, possibly with the intention to use each for certain purposes. Or maybe you only have a debit card, but you know the machines and the cashiers still ask you how you wish to use your card. What's really the difference? Let me explain.

Credit vs. Debit

The major difference between choosing credit vs. debit is how the money is taken out of your account. A debit card is linked directly to your bank account; therefore, as soon as you make a purchase it is only a matter of hours before the charge is deducted from your account. When you pay with a credit card you decide when you wish to make the actual payment on your card, usually when your bill comes due in a few weeks. MasterCard explains it in the following way: "When you use a debit card ... the transaction is completed in real time ... you authorize the purchase ... and the money is immediately transferred from your bank account. With a credit card, or using a debit card as credit, it's an offline transaction." The difference is that an offline transaction on a debit card means that the funds are not transferred for up to 2-3 days which gives customers time to confirm that the balance is present in one's account. In addition, once you enter your PIN number for a debit card transaction, all of your banking information is available for someone to steal and use.

Prevention of Overcharge Fees

If your card information is compromised, and you paid with a debit card at checkout, there is a high possibility that you could be looking at significant insufficient funds fees. According to an article posted by CNN "under federal law, your personal liability for fraudulent charges on a credit card can't exceed $50. But if a fraudster uses your debit card, you could be liable for $500 or more." In addition to the fees you may need to pay, it could take longer to receive credit for the money that you did not authorize to be spent if your debit card is the one compromised. CNN goes on to say "If a crook uses your debit card, not only can they drain your account, but it can take up to two weeks for the bank to investigate the fraudulent charges and reimburse your account." But, "if someone uses your credit card, the charge is often credited back to your account immediately after it's reported.” The use of a credit card gives you ample time to check your statement charges and determine if each transaction was made by you prior to owing the money on questionable charges. You have more time to report the fraud and need less time to make up for it.

What if I Don't Have a Credit Card?

As a general rule, when given the option, try to sign instead of providing your PIN number at registers and ATMs, and if a machine looks questionable, do not use it! Use ATMs only from reputable banks to avoid the risk of third party theft. Additionally, scan your account activity on a regular basis and report any unauthorized to your bank right away so that you have ample time to take action and protect yourself from any future problems! Finally, if you must use the debit option, try to keep as little cash as possible in your checking account. This may help mitigate how much cash may be stolen from your account in the event fraud does occur.

Have an experience or story to share about your debit or credit card being compromised? Or maybe you have additional tips & tricks you’d like to share. Feel free to post them below!