Using Debit Vs. Credit on a Debit Card

Often when a person uses a debit card to make a purchase, the retailer will ask whether the person wishes to pay by debit or credit. This can evoke some confusion, as the person is drawing money from the same source, his checking account. However, while the money is coming from the same place, the method by which the money is withdrawn from his account will differ depending on his selection.

Debit Cards

Debit cards can be used to draw money out of a person's checking account. At automatic teller machines, debit cards can be used to withdraw cash, while at retail establishments they can be used to pay for purchases. However, unlike a credit card, which draws money against a line of credit, debit cards can only be used to draw money out of a bank account in which funds already exist.

Debit

When a person chooses to pay for a purchase as a debit transaction, he is drawing money directly out of his checking account. The retailer will generally ask the person to enter a personal identification number to confirm that he is the rightful holder of the card. If there are insufficient funds in the person's bank account, then he will not be able to make the purchase as a debit transaction.

Credit

A "credit" transaction on a debit card still draws money from the card holder's checking account. However, instead of having the money processed directly through the individual's bank, this transaction is routed through a credit card company. The company that will process the transaction will correspond with the logo placed on the front of the debit card. The transaction will generally not be reflected immediately on the individual's checking account, but will post in several days.

Considerations

Although the term "credit" is used, a debit card can never be used to charge a purchase to a line of credit, such as is done with a credit card. For this reason, these "credit" transactions do not constitute a loan and will not affect the card holder's credit rating. However, as with some credit card purchases, they will generally take a few days to process.