I like to think of myself as a reasonable, well thought out person. I can generally make consistent, rational decisions, on a regular basis. Except when it comes to choosing whether to run my debit card as a debit card or a credit card. My life instantly feels filled with unabashed befuddlement. This must end. I want to employ a consistent strategy.
Upon researching what to do, I found the following factors to consider. And personally, I believe I will now consistently choose the debit card action, because I don’t want to cost retailers, and I don’t want to have a delay in when my transaction is processed. Your choice may be different, but either way, you should know the facts.
Running as Debit
– Requires you type in your four digit PIN number.
– The only way to get cash back, with no ATM fees.
– From a merchant’s perspective this is the closest you can get to paying cash.
– Fees are minimal to a merchant and it benefits them for you to use this option.
– These transaction are considered “online” and your purchase will be automatically be deducted from your account.
– Since these transaction are run through STAR or NYCE they aren’t offered the extra protection of a credit card, though all funds in your checking account are protected by your bank.
– In a few rare cases, banks limit debit transactions per month or you are charged fees for using debit. Why? You’ll see in the next section.
Running Debit as Credit
– Considered an ‘offline’ purchase, transactions run this way will most likely not come out of your account immediately, but will be charged in a batch at the evening when the store closes, though this varies by merchant.
– Banks especially benefit from debit cards used as ‘credit’ because the merchant is charged higher fees which go directly to the bank. This is actually a huge source of revenue for the bank.
– Because banks benefit from you running your debit card as credit, they will often offer rewards or incentives for choosing this method.
– You’ll notice your debit card has VISA or MasterCard logo on it. This means when your debit card is run as credit it is backed by this company. For example, if your debit card is backed by VISA, you are eligible for their zero liability policy.
– Because of the high fees charged to the merchant, these fees are often passed back to you the consumer by higher prices and/or minimum purchase limit for paying with plastic.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.