Whats the difference between Debit and Credit?

Question

When I go somewhere and pay for something and use my Debit Card....they always ask Debit or Credit? Credit, they swipe it, I sign the paper and i go on. Debit, I put in my pin number then they give me my receit. What is the difference in running my card as Debit or Credit besides just having to type in my pin #? Does the transaction go to the Bank the same? Why not just run them all as credit so u do not have to put ur pin in?

Answer 1

The next time you get your monthly bank statement look for a column that says "debit". The debit column shows withdrawals from your saving/chequing account. When you use your "debit" card it is like writing a check. You are making a withdrawal as if you were right there in the bank. When you choose debit, you swipe your card ( or the clerk does) and access your bank account by using your pin number. The money is instantly removed from your bank account. That is why you are just handed a receipt without having to sign anything. The receipt is simply a record of the transaction as your proof of purchase.



When you choose credit, then your card ( Visa,Mastercard,American Express, whatever) is swiped, and the amount is charged and can be paid at a later date. It does not go through your bank. It goes to the credit company that issued the card. It may be that you obtained your credit card through your bank and it says Visa or Mastercard on it but the charge still goes to Visa or Mastercard and has nothing to do with your bank account.



The reason you don't enter a pin number for your credit card is because the account is accessed as soon as the card is swiped. Remember that your savings/checking account cannot be accessed until you enter a pin number. The reason you sign the the merchant receipt when using the credit card is because you are entering into a contract which requires your signature for it to be valid. If you look at the receipt that you signed it will often say that you "agree" to pay such and such....

Answer 2

Usually, Debit takes the money out of your account automatically while credit may take a couple of days longer to show on your account. Some places will charge a small fee when you use debit and you will usually have the option to get cash back when you use debit. If it doesn't really matter to you how soon or how late the money is deducted, credit is usually the easier to use. If you forget your id, then you use debit because all you need is the pin #.

Answer 3

Debit takes money from your bank account, and credit is charged to an account that you pay at the end of the month. Credit is pretty much money that you don't have yet, or may not ever have to be honest.