How-to-Tuesday: Choosing Debit or Credit at Checkout

When Should I Use Credit and When Should I Use Debit When Shopping?

It happens all the time: You’re at the checkout, you swipe your debit card, and the machine asks you to choose credit or debit. But wait, didn’t you just swipe your debit card? What is the difference? Depending on what you pick, different things happen when the payment is processed. Let’s take a look at the differences between the two and break down when and why you should choose one over the other:

  • When you select debit: If you select debit then you will have to enter your PIN number and the funds are deducted from your bank account immediately. If they’re unavailable, the bank has the option, depending on your agreement with them, to pay the charge and hit you with an insufficient funds fee, or to decline the charge. To the merchant, this transaction is as close to cash as you can get without using bills and coins, and offers them more forgiving transaction fees than credit cards.
  • When you select credit: If you choose credit, the transaction requires a signature, and is processed by the credit card company. The funds may or may not be immediately deducted from your bank account, depending on how the retailer handles their transactions. Some stores “batch” their credit transactions and send them in at the end of the day. Depending on the bank, using credit instead of debit can offer you some anti-fraud protection that credit cards offer (more on that a little later). This isn’t universal though, so you should check with your bank to be sure. Finally, to the merchant, processing a transaction as credit usually involves a credit card transaction fee to the major issuers, like Visa and Mastercard. This could result in higher prices or fees passed alone to you, or minimum purchase requirements in order to use your credit card.

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So when should you use credit vs. debit? LifeHacker, a great website for life tips, tricks, and downloads for getting things done, helps break it down:

When is Credit the Best Option?

  1. If you are shopping online.
  2. If you’re making large purchases or electronics purchases.
  3. If you’re traveling or are on vacation.
  4. If you are at the gas pump, to help prevent fraud.

When is Debit the Best Option?

  1. If the other party needs to be paid immediately.
  2. When you’ve automated your finances and are on a budget.
  3. If you’re watching your finances, or recovering from poor money management habits.
  4. If you want the best exchange rate on foreign currency.


In either case, choose the option that works for you based on the information above. The best choice for you may not be the best choice for someone else, so think carefully before making your decision!

Happy Tuesday!

Jessica M.

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