Are There Advantages to Running Your Debit Card as Credit?

A customer at a restaurant using their debit card.

Most of us use a debit card for everyday transactions, to avoid the hassle of checks and cash. Debit cards that have a credit network logo like Visa, MasterCard, and American Express typically allow customers to pay using either the debit or credit option at checkout. What are the differences for the customer and the business that accepts these payments?

What Are the Differences Between Choosing Credit or Debit?

There are more differences between these options than whether you will enter your PIN or sign the receipt. Credit transactions are processed through a different network and follow different rules than debit transactions. For the customer, these differences are relatively minor but are important to understand before developing a habit of running a debit card as credit.

  • Debit card transactions usually complete faster. A single debit card transaction is sent by EFT, or electronic funds transfer, which authorizes and clears the movement of money. The customer’s bank account shows the transaction immediately.
  • Credit transactions on a debit card may remain pending. Using the credit option routes the transaction through the credit card network. There may be a hold on the checking account for the amount, or a greater amount, which might take a few days to be cleared and settled. The merchant has no control over these “holds” or pending transactions once they are placed by the bank.
  • Stores might prefer you use the debit option. Every merchant pays a transaction fee for payment processing, and those fees can add up quickly. Depending on the brand and type of card the customer uses and which payment processing partner the store works with, choosing debit rather than credit might save the seller money and improve their profit margin.
  • Customers do not improve their credit score by running a debit card as credit. Running your card as credit uses the credit card network, but it does not help you build credit or raise your credit scores because debit cards spend existing funds and, so, these are not reported to credit bureaus.
  • Selecting the credit option may provide cardholder benefits. When making some kinds of purchases, it can be beneficial to use the credit option to gain cardholder benefits like zero liability for fraudulent purchases, rewards like air miles, entry into sweepstakes, or enhanced warranties.

Are Debit Transactions More or Less Secure than Credit Transactions?

If card security is a prime concern, many people will use the credit option or a credit card to gain these security benefits:

  • Preventing other customers or employees from seeing your PIN number
  • Avoiding PIN collection by hidden cameras or fraudulent keypads
  • Keeping the PIN out of the retailer’s device to avoid losses due to a data breach
  • Without the PIN, there is less risk of scammers getting access to your bank account to make withdrawals or create fake cards
  • If your debit card is lost or stolen, you must notify your credit union or bank within two business days to receive the same protection against fraud as a credit card provides.

How True Debit Transactions Are Processed

True debit card transactions require the choice of debit on the payment equipment. The customer will usually only have this option at a brick and mortar store that has a PIN pad. The money moves through the same paths as ATM transactions, wire transfers, direct deposit, and electronic bill payment.

When the customer chooses the debit option at the point of sale (POS), the following process begins:

  • The payment request is sent to the financial institution that issued the debit card.
  • A hold is placed on the money in the customer’s account.
  • The money is transferred through interbank transfer to the merchant’s bank account.
  • The transfer is usually completed within hours and almost always by the end of the business day.

What Happens When the Customer Chooses Credit as Payment?

The credit path will be used when the customer chooses the credit option at the time of sale. When a customer uses their debit card outside a physical store, they usually do not get the option of choosing debit and entering their PIN. Almost all online transactions are processed through the credit network, as are payment methods like Stripe, Square, and PayPal.

Actual credit card transactions use this network as well. When a customer chooses credit while using their debit card, it travels the same path as a credit card transaction but is marked in the system as a debit card. Because there is no line of credit to borrow against, the funds must exist in the purchaser’s account for the transaction to move forward.

  • The request is sent to a credit card processor.
  • The payment processor sends the transaction information to the bank that issued the debit card.
  • The funds are placed on hold in a pending status by the customer’s bank.
  • The bank or credit union transfers funds to the “acquiring bank,” which serves as a middleman for the transaction.
  • It may take up to three days for the banks to finish paying each other, although the acquiring bank forwards the funds to the merchant’s bank almost immediately.

Is Debit or Credit Better for the Business Taking Payments?

The customer’s reasons to choose one or the other are fairly straightforward, but, for a business owner, the question can be more complex. Much depends on the payment processing partner that they work with and how their fees are calculated.

In both cases, the seller will have access to the funds in the same time frame. In the past, it was usually cheaper for the merchant to ask customers to use the debit option, unless the card itself was unusual or from an issuing bank with a small customer base. However, the laws about credit card and debit card fees have changed recently.

Because of these changes, payment processors have the ability to offer discount programs and flat fees to merchants to help keep these variables under control. With programs from Adept Payments, like our Cash Discount Program, businesses can simply pay a small service fee on all sales, including credit or debit cards, checks, cash, or gift cards.

Payment Processing Is Always Expanding

A customer using their debit card.

Customers want to use the payment method that is most convenient for their financial goals and lifestyle. By partnering with Adept Payments, your business will build lasting relationships with customers while you save money on all types of payment processing. We value our customer relationships just as much as you do, and have built a reputation for integrity in the industry.

Adept Payments partners with you to find the best payment solution for each unique business and tackle challenges as they arise. Contact us today to experience a truly personal and supportive relationship with your payment processor that can save you money and advance your business goals.

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