April 9, 2019

Person swiping debit card at checkout

When purchasing goods in-store or online, using a debit card is a convenient alternative to cash, checks or credit card. However, people often get confused about the difference between debit and credit when paying with their debit cards.

The answer is simple: When you select “credit,” the transaction is processed through VISA® and you will receive a signed receipt. When you select “debit,” it is processed through the ATM network and you will be asked to enter your personal identification number (PIN) to complete your transaction. If you need cash back, you would select the debit option.

For both “credit” and “debit” options on your debit card, you are paying with money already in your account, unlike with a credit card, with which you are paying on credit.

What’s the Difference?

There are a few differences between debit and credit transactions. Because the debit payment option is sent through an electronic funds transfer (EFT), transactions are reflected on your checking account right away. This EFT is also what allows you to withdraw funds from your account. When you select the credit option (with signature), the information is processed through the same networks that credit cards use, which means the transaction will take several days to be authorized, cleared and settled. During this time, you may notice that the transaction is “pending” in your checking account.

Effect on Credit Scores

When you purchase items with your debit card – via either credit or debit – the money comes directly from your account. You are not borrowing money (purchasing on credit), which would be reported to the credit bureaus. Your debit card account activity does not get reported, so those transactions do not show up on your credit report or affect your credit scores.

If you’re actively trying to build your credit, a credit card may be a better option for you. LUSO Federal Credit Union offers a VISA® Credit Card Secured Loan that allows you to establish or rebuild your credit. A secured deposit account is used as collateral, but you can use and repay the funds just like a traditional credit card.

The Bottom Line

If you value convenience and smart money management, reach for your debit card. It’s the ideal way to:

  • Keep tabs on spending
  • Avoid credit card debt
  • Stop writing checks

Best of all, you can use your debit card whether you’re shopping at the store or online. Make the most of your LUSO Federal Credit Union VISA® Debit Card today. To learn more, call (844) LUSO-FCU or click for information on how to use your debit card with our digital wallet.

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