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Debit Cards vs. Credit Cards

Confused about the difference between debit cards and credit cards? Not sure if your debit card should be processed as credit or debit? Don’t worry – you’re not alone. We’ve put together this quick guide to explain some of these differences.

Debit Cards: Part Of Your Checking Account

  • Debit cards are connected with your checking account. Like a paper check, making a purchase with your debit card debits the funds right from your bank account.
  • If there isn’t enough money in your checking account, your transaction will decline (or your checking account will go negative). This means it’s a lot harder to spend money you don’t have.
  • Because the money is taken out of your bank account, you won’t have a monthly bill or pay any interest charges. Since there are no payments, debit cards don’t help build your credit history.
  • Your debit card is also your ATM card, meaning you can get cash from your bank account at an ATM.

Credit Cards: A Separate Credit Account

  • Credit cards are a line of credit that’s separate from your bank accounts.
  • The amount you can charge on the card is determined by your credit limit. If the amount you charged exceeds your credit limit, transactions may decline.
  • You’ll receive a monthly bill and have the option to pay in full or pay a minimum monthly payment each month.
  • You’ll be charged interest if you don’t pay the full balance each month.
  • Credit cards may be used to get a cash advance at an ATM, but this isn’t recommended because it often means additional fees.
  • Credit cards can help build your credit history. They can also harm your credit if you miss payments or carry a balance at or near your credit limit.
  • Many credit cards offer rewards, extended warranties, and other perks.

What About Using Your Debit Card As Credit?

  • Many merchants will give you the option to have your debit card processed as credit or debit. Choosing the credit option will not turn your debit card into a credit card or provide the credit card features mentioned above.
  • It’s up to you whether you prefer to process your debit card as a debit or credit transaction. Here are the key differences between the two transaction types:

 

Credit

Debit

Authorization?

Sign or swipe

PIN

Can Get Cash Back?

No

Yes

Processing Time?

1-2 days

Instant

 

  • One additional difference for Royal Credit Union debit cards is that our nonprofit RCU Foundation gets up to five cents each time you use your debit card to make a debit transaction. There is no additional cost to Members for this feature. It’s just another way that Royal gives back to our communities.

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