Anyone who has used their bank’s check card to pay for items knows that you can use debit or credit to make purchases, but most people don’t know what the difference is besides the fact that with debit you have to enter a pin, and with credit you need to sign. One of the key differences is that the merchant must pay a fee when they process the transaction as credit. If you’re purchasing an item from a store you’d like to support, you should select the debit transaction so the merchant avoids the credit fee.
Another key difference is the processing time for each type of transaction. A debit card transaction pulls the money out of your account immediately, while the credit transaction requires time to be processed before the money is taken out of your bank account.
One final difference is that most banks place a debit limit on your card, meaning you can only use debit purchases on your card for up to a certain amount. If you’re looking to make a large purchase on your debit card you should select the credit option to ensure that you don’t go over any possible limits. (Of course if you’re making a large purchase you should really use a reward credit card as mentioned in our article on ways to save money)