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Economics Summaries
Credit Cards

Debit or Credit ?
A Comparison Summary
How To Pay Using A Debit Card
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This page compares the two payment options available using a debit card. The advantages and disadvantages of specifying debit or credit are compared.
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100

140


How to Pay
Debit vs. Credit
True
Credit Card
DEBIT
.
CREDIT

Type of
Transaction

Pin Number

Signature

Signature

Card
Acceptance

May be refused (car rental companies)

More acceptable

Most acceptable

Annual Fee

none

none

May be substantial

ATM
Denial Fees

Typically $1.50

n.a.

n.a.

ATM
Foreign Fees

Typically $ 2.00

n.a.

n.a.

ATM
Surcharge Fees

Typically $1.50

n.a.

n.a.

Blocking

Some vendors may "lock up" your funds, far beyond the purchase price, and not release them until days later - this can result in overdrafts.

The same may be true, if you specify "credit" on your debit card.

Not a factor, unless you are close to your credit limit.

Credit Score

No effect

Credit card payments affect FICO score.

Credit card payments affect FICO score.

Disputes

Less legal protection

Stronger legal protection

Strongest legal protection

Interchange Fees
(Typical Bank Fee
Charged to Merchant)

$ 0.20 (merchant preferred)

Averages 1.4%
$ 1.40 (bank preferred) for $100 transaction

Averages 2%
$ 2.00 (bank preferred) for $100 transaction

Interest Rate

none

none

12% to 79.9%

Overcharges

Big hassle to reverse*

Easier to correct

Easiest to correct

Overdraft

High fees, typically $35
(a huge source of income for banks)

n.a.

n.a.

POS Fees

A Point-Of-Sale fee may be charged

No POS fees

No POS fees

Rewards

Perhaps 1/4 as generous

More generous

Most generous

Security

Pin number is not secure -
Every use creates added risk.

Much more secure

Most secure

Theft of Card

No "capped" protection
Up to $500 if not reported within 2 business days

Fraudulent charges
capped at $ 50

Fraudulent charges
capped at $ 50

When Money
Is Removed

Immediately

Several days

Two to 30 days
Depends upon billing cycle

* I had this problem. I was paying an auto repair bill using debit, when the mechanic suddenly stopped the transaction while it was going through, because he noticed that he had omitted a charge. The money was GRABBED from my account, but WAS NOT credited to his account. I ended up being charged TWICE. It was a huge hassle to get the bank to credit my account.

150

150 - 600

150

150


Disclaimer
The author is not perfect. Errors can and do occur.
All reported errors will be corrected, upon verification.
Carefully read the terms of service of your debit card provider.

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This Vaughns Debit or Credit payment web
page was last updated on 2017-10-27.