Does Credit or Debit Automatically Take the Money Out?

Some debit cardholders can use their cards in ways that are similar to credit card users, but the payment process is significantly different. Credit card users usually have about 30 days to pay for purchases. Debit cardholders don't have that length of time to pay for their purchases. However, there is a delay in withdrawals from debit card accounts when debit card users sign for their purchases.

PIN vs. Signature

Debit cardholders usually authorize purchases made with their cards by entering a personal identification number at a cash register terminal. Some cardholders also may sign for a debit card purchase instead of using a PIN, just as credit cardholders do. Debit card users simply select "credit" instead of "debit" at a cash register terminal to sign for their purchases. According to Consumer Reports, PIN-based transactions are immediately withdrawn from debit card users' checking accounts. However, signature-based transactions usually aren't deducted for up to two days.

Security

The security of a debit card transaction is just as important as how quickly the withdrawal takes place. According to Consumer Reports, many retailers report that incidents of fraud are usually higher with signature-based debt card purchases. That's because it's easy for someone who steals a debit card to forge a signature, since cashiers usually don't examine the signatures on the backs of debits cards. Furthermore, not all debit card users sign the backs of their cards. PINs are usually kept secret, which makes it harder for thieves to use PIN-based cards. However, Consumer Reports notes that there have been security breaches in which hackers have stolen PINs from computer databases.

Overdrawing Accounts

It may be harder to keep track of your checking account balance because of the delay in withdrawals for signature-based purchases. People who forget about such transactions may think they have more money in their accounts than they do. As a result, they might make other purchases that exceed their account balances. Therefore, debit cardholders' future purchases may be rejected until they increase their balances to cover all transactions.

Card Terms

You should check with your bank to determine what type of protection you have when you sign for debit card purchases instead of using a PIN. According to Consumer Reports, debit card users usually have better fraud protection if they sign for their purchases. Some card issuers provide zero liability for debit cardholders. That generally means you won't be out any money if someone fraudulently withdraws cash from your debit card account. In such cases, the bank that issued the card would restore the stolen funds. However, some PIN-based transactions may be excluded from card issuers' zero-liability policies.