When managing your money using a debit or credit card, multiple resources exist to help you track your spending. However, not understanding the way debit and credit card transactions operate can result in confusion. Debit card transactions typically post immediately while credit card transactions often take days to post. The difference stems from the way each transaction is processed.
Debit Defined
A debit card transaction includes any transaction that uses money from a bank account and requires the use of a personal identification number. Once you enter your PIN, the money comes from your account. The reason money is automatic from a debit card is that the bank does not need to verify funds. Either the money is available in your account or your card is declined. The money is extracted immediately to prevent any overlap with other transactions.
Credit Card Processing
Credit card processing is a complex, multi-party process. The parties involved all have their systems of verification before passing the charge on to you. There are approximately 15 steps between presenting your credit card to a merchant and the charge being applied to your account. If you own a major credit card, the time it takes to process your card can take days, sometimes weeks, to process especially when making a payment to a merchant or retailer using a manual system to process credit cards.
For example, if you make a purchase in a catalogue by mail using your credit card, the transaction does not begin until the merchant sends off your credit card information.
Debit as Credit
A transaction with a debit card is never actually credit. However, the transaction can mimic a credit card transaction by floating additional days after you make a transaction. A float is the number of days it takes a bank to extract money from your account or deposit money into your account following a transaction. A float occurs when you use your debit as a credit card because your card is being processed as a credit card, which gives you greater flexibility in spending your money. For some, this convenience means an added benefit of keeping more cash in your account while you shop. However, varying float times can lead to overdraft charges when your account funds are low.
Considerations
When it comes to managing your money, debit cards offer the simplest option. Major credit cards are also a simple way to keep track of your spending as long as you use your card infrequently. Too many transactions at once can be confusing since a large amount of purchases in a short time frame will likely not show up in chronological order on your statement. Keeping a transaction register is helpful in avoiding overdrawing your account or overspending on your credit card.
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