It looks and smells like a credit card, but a debit card is not a credit card. While you can use a debit card "as credit" to pay for items at the register and online, several key differences set a debit card apart from the standard credit card. Choosing the credit option at the register means that you do not need to use the personal identification number, or PIN.
Debit vs. Credit
You are probably familiar with the phrase "debit or credit?" when you hand the cashier your card at checkout. If you are paying with a credit card, you have to choose credit. But if you are paying with a debit or check card that is attached to one of the major credit card networks, you can choose either. The debit option pulls the money directly out of your checking account. You usually have the option of getting cash back as well. The credit option routes the transaction through one of the credit card processing companies. You don't use your PIN and you usually cannot get cash back.
Using a debit card with the credit option does not mean you will have to pay interest on the purchase amount down the road. Unlike a credit card, you are not taking out a loan when you use a debit card, even if you pick credit. The money is taken out of your checking account within a few days. Since the credit option is not actually part of a credit card, you do not have to worry about paying late fees or missing a credit card payment for transactions on which you use a debit card with the credit option.
In some cases, when you choose to use a debit card with the PIN at a register, your bank may charge you a fee for the transaction. Some banks charge a fee if you choose the "debit" option more than a certain number of times each month. When you pick credit and do not use your PIN, the store pays a higher fee to the bank. If fees are attached to your use of a debit card, unless you need cash back, it may be in your best interest to choose credit when using a debit card at a store, since the store pays the fees, not you.
Using a debit card with the credit option carries some risks. Depending on your bank, you may accidentally overdraw using the card and end up paying a large fee; some cards will not let you use the card if there is not enough money in the account. If your debit card number is stolen, and someone uses it fraudulently, you lose money from your account right away. You may get it back, but in the meantime, you may run short of cash.
- Hemera Technologies/AbleStock.com/Getty Images