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When you use your debit card, you may be able to pick “credit” or “debit” at the payment terminal. You can choose credit, and it will work, but you won’t really be using your debit card as a credit card. The transaction amount will still be directly debited from your bank account and you won’t pay interest or receive a bill.Choosing between debit and credit at the payment terminal has more to do with how the payment is processed. Here’s a closer look.
Can You Use a Debit Card as a Credit Card?
Technically, no. A debit card is linked to a bank account, often a checking account. You can use your debit card to get cash at an ATM and as a payment card for making purchases, either online or in person. When you make a transaction with your debit card the money is “debited” from your linked account. Unlike paying with a credit card, you aren’t borrowing the money and paying it back at the end of the month (or potentially later, in which case you will typically incur interest). Some consumers use their debit card as a budgeting tool since you generally can’t spend money you don't have.Where some confusion may come in is when you use your debit card for a purchase and the payment screen asks, “credit or debit?” If you select the debit option, you'll typically be asked to enter your personal identification number, or PIN. If it's the correct code and you have enough in your account to cover the purchase, your payment will be approved. The amount of your purchase is deducted from your account right away.If you select credit, the money will still be debited from your bank account. However, there may be a slight delay since the payment will be processed differently.Recommended: Using a Credit Card Like a Debit Card
What Happens When You Try to Use a Debit Card as a Credit Card?
Selecting credit doesn't magically transform your debit card into a credit card (despite the fact that there may be Mastercard, Visa, or other credit card logo on your debit card).You are still authorizing a debit from your checking account. The only difference is that the transaction will get processed through a credit card network (such as Visa MasterCard, American Express, or Discover) rather than through a debit network (such as PLUS or STAR). When you choose the debit option, your transaction information gets sent through an electronic funds transfer (EFT) network. The network relies on a single transmission to authorize, clear, and settle the purchase amount. As a result, the transaction is reflected on your checking account right away. When you choose the credit option, it can take up to two or three days because now the merchant’s credit card processor and the payment gateway (e.g., Mastercard or Visa) are involved. Once the merchant batches their receipts and reconciles them with the credit card company, then your charge goes through. This can take roughly two to three days. The delay doesn’t mean you don’t need to have the funds available. If you don’t have enough in your account to cover the charge, it will likely be denied.Recommended: How to Get Cash From a Credit Card
What Happens if You Accidentally Choose Credit on the Payment Terminal?
Nothing big will happen, and you’ll still be able to make the purchase. You may have to provide your signature to the terminal or on the receipt, but the transaction will go through, provided you have sufficient funds in your account. It may also take a little longer until the funds are withdrawn from your account.
Things to Understand Before Using Your Debit Card as a Credit Card
Here are some key things to keep in mind when choosing between credit rather than debit at the point of purchase.
Choosing Credit on a Debit Card Does Not Mean Pay Later
Just because the transaction may take a few days to process doesn’t mean this is a “buy now, pay later” transaction. Even if the funds aren’t pulled from your account immediately, they will be in a day or two, so they must be in the account. In fact, if you don’t have the funds available at the time of the transaction, the purchase will likely be declined.
Tracking Your Budget Can Be More Challenging
If you opt to use your debit card as a credit card, it could make budgeting a bit more complicated. That’s because the funds aren’t debited immediately. When you look at your account that night, the funds may still be in your account and the balance won’t reflect your true balance. If you think you have more in your account than you really do, you end up overdrafting your account and incurring fees each time you slide, tap, or dip your debit card.
You May Get More Consumer Protections
If you choose credit when making a debit card purchase, the card networks may offer you protections, such as zero liability for fraudulent purchases. That protection could come in handy should you ever need to dispute a charge.
Could Cost the Merchant More
Using your debit card as a credit transaction can end up costing the merchant more than if you chose a debit transaction. A credit transaction adds layers to the process, which can lead to additional fees for the retailer or service provider. This won’t affect your bottom line, but if you’re trying to support small businesses you might want to opt for debit over credit.Recommended: What is a Cash Card?
Pros and Cons of Using Debit Card as a Credit Card
Pros
Cons
You may receive additional consumer protections
It can take additional days for the transaction to appear, which can complicated budgeting
You don’t have to remember your PIN
The merchant may pay more fees
For smaller purchases, you may be able to save time at the checkout
Could end up overdrafting your account and getting hit with fees (if your bank allows overdrafts)
On the plus side, using your debit card as a credit card may offer you some additional fraud protection. It can also be a handy option if you can’t remember your PIN. In addition, it could also save some time at the point of sale for smaller purchases, since you likely won’t have to sign (or punch in your PIN) for the transaction to go through.The downside is that it will take longer for the transaction to go through behind the scenes. As a result, you'll have to collect your receipts and manually subtract debits to know exactly what your bank account balance is at the end of the day. If you make a mistake (and think you have more money in the account than you really do), you could overdraft your account and get hit with hefty fees.
Does Using Your Debit Card Build Your Credit?
No. Whether you select debit or credit at the checkout, using your debit card won’t help you to build your credit. To improve your credit, you generally need to borrow money and then pay it back responsibly, which you can’t do with a debit card. Having and using a credit card (and paying your balance in full and on time each month), on the other hand, can help you build a positive credit history.
The Takeaway
Contrary to what many people assume, choosing credit rather than debit when using your debit card doesn’t turn your debit card into a credit card. It just means the transaction will be processed through a credit card network and that there may be a slight delay before the money will debit your account.Unlike using a credit card, going with the credit option on a debit card doesn't help you build credit or give you a grace period before you have to pay for the purchase. For that, you would need to use a credit card rather than a debit card.If you’re currently thinking about getting a new credit card, Lantern by SoFi can help. With our credit card marketplace, you can view multiple credit card offers without scouring the web and checking multiple sites. You just need to fill out one short application, and checking your rates won’t affect your credit score.
Frequently Asked Questions
Can any debit card run as credit?
Is it safe to use a debit card as a credit card?
Can I use a debit card as a credit card with insufficient funds?
Can I use a debit card as a credit card for online purchases?
Photo credit: iStock/Milko
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About the Author
Jason Steele
Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
