When you look at your debit card, it most likely has a Visa or MasterCard logo on it. If so, then you can also use the card like a credit card. This means you don’t have to enter a debit PIN at the point of sale.
However, the question is, how should you use your debit card at the point of sale? And is it safer to use a credit or debit card when making a purchase?
The quick answer is that you should use a credit card rather than your debit card. The reason is that credit cards give you more protections than debit cards do. But what about when you simply can’t use your credit card? Is using a debit card as credit okay?
Running Your Card as Credit vs. Debit
When a debit card can also be used as a credit card, the line is blurred. That’s because using the card as credit still authorizes a debit withdrawal from the bank account the card is attached to. It might be logged as a credit card transaction on your receipt, but that simply states how you used the card.
There’s a key difference here. When you run your debit card as credit, you still pull money from a bank account to your name. When you use a credit card, you pull funding from a line of credit to your name.
It can also take a few days longer for the money to be debited from the account when used as credit rather than debit. Using the card as debit immediately deducts the money from the bank account.
On the merchant side, it costs a merchant more money to process a credit card transaction than it does a debit card transaction. This has no real impact on the consumer unless the merchant adds a percentage to the transaction amount to pay for credit card processing fees.
Using Credit Instead of Debit
Going back to the idea of using credit cards instead of debit cards, it’s important to understand the reasoning behind this.
First, credit card companies provide cardholders with fraud protection. Unless an individual’s bank provides this type of protection with the bank account, a debit card isn’t going to have this protection. Fraud protection can come in handy if someone skims your card information. It’s generally much safer if someone steals from your line of credit fraudulently as opposed to stealing from your bank account directly.
Second, a credit card directly impacts your credit report, whereas a debit card doesn’t appear on your report. You need to use a credit card at some point if you want to establish your credit history. When using a line of credit, you must pay back what you borrow and do so on time so that the payment is positively recorded on your credit report. When you use a debit card, you’re simply subtracting from your bank account. Of course, if you have excessive credit card debt, you shouldn’t be spending like crazy with your credit card OR debit card.
Drawing the Line
It is easier to draw the line between credit and debit cards based on where the funding comes from and the impact they have on your credit. For instance, a debit card that can be “used as a credit card” isn’t really being used like a credit card – it doesn’t pull from a line of credit. Having a Visa or MasterCard logo on the card simply allows you to use it where credit cards are accepted since some places, such as online stores, can’t take a PIN to complete a transaction.