Lesson #3: Credit or Debit

Now that you know what your check card is, why does the girl behind the register keep asking you "credit or debit"? What's the difference?

When you select credit, you are doing a signature based transaction. Meaning the store will send an electronic message to your bank saying that you just made a purchase for $5.04, that amount will then be placed "on hold" for a certain number of business days depending on the store. After the hold is released that $5.04 "will post" to your account.  So if you check your account balance after the transaction and you see your current balance is $210.96 & your available balance is $205.92, that means the $5.04 is on hold.  After a couple of days your current balance will be $205.92 & your available balance will be $205.92, and if you use online banking you will see that item that you purchased show up on your statement.  So, when selecting credit you will sign for your transaction and you will not enter your pin number at the register.

When you select debit, you are doing a pin based transaction. In this case the store sends an electronic message to the bank saying that you just made a purchase for $5.04, but this time the funds come out of your account right away.  So after this transaction your current balance & your available balance will be the same.

There are positives and negatives to both types of transactions.  With a credit transaction you don't have to enter your pin number.  So you know that man that is standing right right behind you?  You don't have to worry about him seeing your pin number & you possibly forgetting your card as you hurry out of the store.

With a debit transaction if you don't balance your checkbook *that's another lesson* & you swipe your card often, you could lose track of how much you really have in your account & with overdraft fees average $34 that could become costly.

What do I do?? Oh, I use credit for everything, my bank has a great protection policy in the event I lose my card.  And balancing my checkbook is a part of my routine so it doesn't feel like work.  Oh yeah, and somehow I always have that person who is breathing down my neck at the register...so I don't always feel comfortable entering my pin #.