“Will that be debit or credit?” Chances are, that is the most common question you hear when shopping. The reason they ask is the transactions are processed quite differently and merchants really want to hear one answer over the other.

Choosing debit will be music to merchant’s ears, as they pay a lower bank fee on these transactions. But what does it mean for the consumer?

Credit Card Perks

Traditional credit cards offer many features and benefits. Many allow you to earn “points” with every purchase that you can redeem at several retailers, and some travel services and rental car companies offer direct discounts for the use of certain credit cards. Credit cards also provide better fraud protection than debit cards. And they allow you to build credit as you use them: provided you stay up to date on your payments, a healthy credit card account can enhance your overall credit rating, and the card company might periodically boost your credit limit. Having good credit is important when it comes to making any kind of major life purchase that entails a personal or business loan. But be aware of annual fees or hidden charges that might come along with your shiny piece of plastic. And of course beware of incurring excessive credit card debt, which can damage not only your credit rating but your financial stability.

Debit Cards Check Spending

Because they are tied directly to your bank account, debit cards have a built-in safety valve. You cannot spend what you don’t have. For the most part, your spending is limited to your cash on hand, or in your account. This keeps you from creating debt you cannot afford or easily pay off.

In recent years, however, debit cards have begun offering many of the same features and perks as credit cards, making them more attractive.

Check Cards

For the consumer using a check card, either option works. Choosing the credit option usually requires a signature, like a traditional credit card purchase. Choosing the credit option when using a check card often comes with the liability protection of a credit card purchase, including protection against fraudulent use. Banks sometimes extend reward points and other incentives to check card users who select the credit option.

Choosing the debit option when using a check card requires the entry of the card’s 4-digit PIN, just like a regular debit card. When using a check card as a debit card, you have the option to get cash back during a transaction. The is the only time it benefits the consumer to select debit over credit when using a check card. By receiving cash during the transaction, you avoid a trip to the ATM or bank. Out-of-network ATMs often charge hefty fees, and a bit too often, ATMs are the site of robberies – both of which you’ll avoid by getting cash from a store cashier.

When Credit Counts

Certain scenarios definitely call for using credit cards. They are the safest option in terms of fraud protection when shopping online. Credit purchases often carry an enhanced warranty on some kinds of items, and card lenders may go to bat for the consumer if there’s a dispute about a purchase or product. Credit cards are the “safer” option for many reasons. However, if budgeting and money management are issues for you, and you need a mechanism to help you avoid debt, choosing debit may be the better way to go.

Call the accountants at Preziosi Nicholson today to learn how our accounting professionals can assist you in managing your personal finances and mastering the art of when to use credit or debit. Our office is located in Millville, NJ. 856-794-8400