USA scenario here: say I have a $2000 car repair bill and use my debit card.
Can’t be bothered to put in my pincode so I hit credit, payment goes through without pincode.
Why does the consumer have the option to pick here?
In: Other
You should always choose credit when given the option with a debit card. Then the transaction gets run through Visa or Mastercards or whoever system amd you get benefits that you dont get with just using the debit function. Usually, there is some sort of fraud protection or maybe even an extended warranty. You have to look at the documentation to see what exactly you get.
Debit card transactions are treated like cash (direct transfer from your bank account to the merchant’s bank account), so it needs the pincode as an extra level of security at the time of purchase. Credit card transactions are fundamentally different in how money flows (your bank pays the merchant’s bank instantly, then bills you later). Since banks and other parties behind the scenes (like payment networks) benefit from you using credit cards (through fees, interest, etc.), they build in the necessary security safeguards behind the scenes, so in theory you don’t have to worry about it. That’s why it’s easier to dispute and reverse a credit card charge but not a debit card purchase.
Making credit card transactions faster and easier for cardholders is a huge focus of the payments industry, which is why you not only no longer need a pincode, but also see things like tap-to-pay (no longer need to swipe), digital wallets (no longer need a physical card), tokenized online payment credentials (can just click a “buy now” button), and biometric payment authorization (can complete a transaction with just a palmprint or eye scan, etc.).
Running it as a credit generally costs the merchant more, but is more convenient for the customer and is faster. For a fast food restaurant, you certainly wouldn’t want customers holding up the line to enter a PIN if you could avoid it. Honestly, for a car repair shop, it would make a lot more sense to configure the terminal to require the PIN for debit cards, but they’re probably just not focused on that aspect of their business to care to figure out how to do it.
Because back in the day and even to this day debt machines were capturing and keeping your PIN, which is a violation of most agreements. This led to some pretty massive theft which is what caused a shift in perception of debit cards leading to their brief decline.
By running it as credit you get the benefit of a credit networks security and you are not entering your PIN. All in all better security for you.
There are certain options that are only available as one or the other. Like you can pick debit and get cash back, but you have to know the pin. Credit is easier because you don’t have to know the pin, which means you can hand your card to someone else to pay for something. They can also have different limits applied to them, which can vary per bank and you can call to request that it be changed.
As a cybersecurity guy in the financial sector, I have to offer this guidance though: never use your debit card for anything other than using an ATM of a reputable bank. Use credit cards (not debit card in credit mode – actual credit cards) for everything else. I understand that not everyone has that option for various reasons though, which is why I called it guidance and not a rule.
To answer your question it’s kind of a relic.
Originally you would have a specific ATM card you would use when you needed to get money. It wasn’t uncommon for banks to not reciprocate each others machines and it was a hassle.
When debit cards were introduced being able to use as credit was a perk (and potentially a byproduct) but it also introduced the ability to get cash back when making a purchase.
Doesn’t even make sense to me. How can my debit card be used as a credit card? My debit card has no credit limit
The card you use as a debit card is *also* a credit card. Well, technically it uses the credit card processing network to process the transaction instead of the debit card network.
If you look at your debit card, you will see either Visa or Mastercard logo. That is the alternate processing network.
If you use this alternate processing, you and the merchant are agreeing to abide by those terms and conditions (ie Visa’s terms) rather than your bank terms for debit transactions.
There’s a regulation requiring payment networks to accept the as credits. IIRC the original reason was to enable asynchronous batch processing which credit allows but debits didn’t and was quite common with merchants at the time.
Folks, I don’t think anyone here is answering the implicit question from /u/Shifu_1 which is: Why does it seem like we are being granted credit when we use a debit card as a credit card? The debit card function will immediately deduct, and will decline if the account can’t cover the amount. But the credit function takes days to settle. Are we effectively being extended a line of credit, or will it also decline if the account can’t cover? If it settles in days how do they know?
Latest Answers