When you use a bank card in a store, you are often offered the option of using it as a debit or credit card. The main difference is what network the transaction is processed through. It is important to remember that in either case, the funds are taken directly from your account; using your bank card as a credit card does not magically create a line of credit.
The primary difference between debit and credit is in the way that the transactions are processed. When you run your bank card as a debit card, you will be asked to enter a personal identity number (PIN), and the funds are removed from your account instantly. When you select a credit option, the transaction is verified with your signature, and the funds may not be removed from your account right away, depending on how the store processes its credit card transactions. Many do what is known as "batching," meaning that all of the credit transactions are run in a batch, typically at the end of the day, and it may take a day or so for your credit transaction to clear.
From the point of view of the merchant. the difference between credit and debit is typically a fee. Smaller companies may be charged more for card transactions run as credit, so if you are visiting a small, locally-owned business, you may want to consider selecting the debit option as a courtesy. This difference between debit and credit may not
be important to you, and it doesn't apply to all merchants, but it can help save money for smaller stores.
Some debit card issuers promise stronger protections if you use your card as credit rather than debit. These issuers may lower your liability or include fraud monitoring or other services for "credit" purchases. Such protections may be at the discretion of the issuer, however, and may not be included with all cards. It's important to remember that just because you sign for a debit purchase rather than entering your PIN does not mean that you're covered by the same laws which protect credit card users.
There can also be a difference between debit and credit if you have a card that awards you points or rewards. In many cases, only purchases processed as "credit" will earn you rewards; anything you buy using your PIN probably won't qualify. Such rewards usually come from the credit card company that issues the card, so you'll only get points for transactions that go through their networks.
You can typically only get cash back with your purchase if you use the debit option, which can be a big difference between debit and credit for some people. Using your debit card to get cash at the store rather than at an ATM usually means that you won't have to pay any additional fees. Some banks do charge fees for all PIN purchases, however, so you may end up paying extra anyway.