• Friday, December 01, 2023
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Credit vs debit transactions with your ATM card


“I handed him my debt card and the cashier asked if I wanted to charge it credit or debit. Is he insane?”

A few years ago when I first got my debit card, I was confused whenever a cashier asked me whether I wanted to charge my card using credit or debit. Debit please, I always said, wondering whether those people recognised that it’s actually a bank card. Eventually, I found out that my debit card was capable of transactions through the credit card network as well. It would still draw money from my bank account though, so the only difference seemed to be just signing versus punching my pin.

My mom always said “anything related to money shouldn’t be seen in public”, so I started requesting for a credit transaction just in case someone saw me input my pin. Little did I know that I also:

• Added Fraud Protection – Credit transactions go through their respective network (Visa or Mastercard depending on the logo on your card), which has a zero-liability policy. Send the debit transactions without the credit card network and you could be liable for up to $500.

• Increased Reward Points – Some bank cards even let you accumulate reward points with your debit cards, but only if you use it through the credit card networks.

• Get No Cash Back – One of the great features of using a debit card is that you can take money out using the same transaction without any additional fees. Say credit and you don’t get the same convenience.

• Potentially Lowering the Merchant’s Margin – Bigger companies negotiate their credit and debit transaction fees, but smaller merchants who don’t have the same leverage may be charged more for credit transactions. Next time you use your debit card at a local store you want to support, consider saying debit.

Note that whether it’s a credit or debit with your ATM card, the money is still coming out of your bank account (so not 0% balance transfer credit cards by any stretch). Unless you opted out (assuming your bank even let’s you do it), you will be charged with overdraft fees if your account doesn’t have enough money to cover your expense.