What's the difference when asked for “debit or credit” by a store when using credit and debit cards?
"These are two different ways of processing payments. They go through different systems many times, and are treated differently by the banks, credit card issuers and the stores. Merchants pay different fees on transactions paid by debit cards and by credit cards. Debit transactions require PIN, and are deducted from your bank account directly. In order to achieve that, the transaction has to reach the bank in real time, otherwise it will be declined. This means, that the merchant has to have a line of communications open to the relevant processor, that in turn has to be able to connect to the bank and get the authorization - all that while on-line. The bank verifies the PIN, authorizes the transaction, and deducts the amount from your account, while you're still at the counter. Many times these transactions cannot be reversed, and the fraud protections and warranties are different from credit transactions. Credit transactions don't have to go to your card issuer at all. The merchant can accept credit payment without calling anyone, and without getting prior authorizations. Even if the merchant sends the transaction for authorization with its processor, if the processor cannot reach the issuing bank - they can still approve the transaction under certain conditions. This is, however, never true with debit cards (even if used as ""credit""). They're not deducted from your bank account, but accumulated on your credit card account. They're posted there when the actual transaction reaches the card issuer, which may be many days (and even many months) after the transaction took place. Credit transactions can be reversed (in some cases very easily), and enjoy from a higher level of fraud protection. In some countries (and most, if not all, of the EU) fraudulent credit transactions are never the consumer's problem, always the bank's. Not so with debit transactions. Banks may be encouraging you to use debit for several reasons: Merchants will probably prefer credit because: Consumers will probably be better off with credit because:" It depends on your bank and your terms of service, but using the card one way or the other may affect things such as how long it takes to process, what buyer protections you have, etc.  It also affects the store as I believe they are charged differently for debit vs credit transactions. "When using a debit card in a ""credit"" way, you don't need to enter your PIN, which protects you from skimmers and similar nastiness. Also, assuming it's a Visa or Mastercard debit card, you now have access to all of the fraud protection and other things that you would get with a credit card. The downside for the merchant is that credit card transaction fees are typically higher than debit card transaction fees. I'm less familiar with using a credit card in a ""debit"" way, so don't have anything to offer on that part of your question." I'm surprised by all the pro-credit answers here, debit has some definite advantages. Most importantly, when you pay with a credit card, the merchant pays around 3% of the transaction to the credit company. In many states, they are forced to charge you the same amount, and this is frequently toted as ''consumer protection''. But consider what this means for the business: they loose money for every credit transaction, and they're legally forbidden to do anything about it. So you're taking 3% from a business and handing it over to a massive cooperation.  To make matters worse, the buisness is inevitably going to have to raise their prices (albiet by a small amount), so in the end the average consumer has gained nothing. On the other hand, the credit card company wins big, and they use their profits to pay lobbyists and lawyers to keep these rules in place. To put in the worst possible light, it's essentially legal extortion, verging on corruption. As for the fraud protection offered, while it may be true that credit cards will offer a more hassle-free reimbursement (i.e. you just don't have to pay the bill) if your card is stolen, consumer protection laws also extend to debit: in many cases your bank is legally required to cut you a check for all the money you lost. "Just to add about using debit card as ""credit"" vs ""debit"" way: In addition to the difference of having to enter the PIN when using ""debit"" mode (vs having to sign in ""credit"" mode), for stores that offer cash back (i.e. get cash out of your account at the same time as paying), you can only get cash back when using ""debit"" mode." Credit in debit way - the card simply functions like a debit card for that transaction - pulling cash from your checking account. No difference.  You've simply discovered the fact that some banks are using the same piece of plastic for two functions, debit which draws funds directly from your checking, and credit which offers you time to pay a bill the comes in some time later. It's a personal choice.
In most cases, the brand on the card, eg Visa or MasterCard, is a middleman. The company processes the transaction, transferring $xx from the bank to the seller, and telling the bank to debit the buyer's account. The bank is at risk, not the company transacting the purchase. What's interesting is that American Express started as both. My first Amex card, issued in 1979 (long expired, but in my box of memorabilia) had no bank. American Express offered a card that offered no extended credit, it was pay in full each month. Since then, Amex started offering extended credit, i.e. with annual interest, and minimum payments, and more recently, offering transaction processing for banks which take on the credit risk, essentially becoming very similar to MasterCard and Visa. "A lot of credit card companies these days uses what they call ""daily interest"" where they charge the interest rate for the number of days till you pay off what you spent. This allows them to make more money than the ""period billing"".  The idea of credit, theoretically, is that there isn't really a day when you can borrow without paying interest - in theory" Here's a simple answer: If your debit card has a visa or mc logo, it can be used as a 'credit card'.  In order to do so, you shouldn't enter the pin, instead choose 'credit' and sign for it. Unlike a credit card, you can't spend money you don't have but like a credit card, your purchase is protected by the credit card company (visa/mc) and gives you privileges like zero fraud liability and purchase disputes. http://www.moneycone.com/should-you-sign-for-a-debit-card-purchase-or-use-your-pin/ "You ask about the difference between credit and debit, but that may be because you're missing something important. Regardless of credit/debit, there is value in carrying two different cards associated with two different accounts. The reason is simply that because of loss, fraud, or your own mismanagement, or even the bank's technical error, any card can become unusable for some period of time. Exactly how long depends what happened, but just sending you a new card can easily take more than one business day, which might well be longer than you'd like to go without access to any funds. In that situation you would be glad of a credit card, and you would equally be glad of a second debit card on a separate account. So if your question is ""I have one bank account with one debit card, and the only options I'm willing to contemplate are (a) do nothing or (b) take a credit card as well"", then the answer is yes, take a credit card as well, regardless of the pros or cons of credit vs debit. Even if you only use the credit card in the event that you drop your debit card down a drain. So what you can now consider is the pros and cons of a credit card vs managing an additional bank account -- unless you seriously hate one or more of the cons of credit cards, the credit card is likely to win. My bank has given me a debit card on a cash savings account, which is a little scary, but would cover most emergencies if I didn't have a credit card too. Of course the interest rate is rubbish and I sometimes empty my savings account into a better investment, so I don't use it as backup, but I could. Your final question ""can a merchant know if I give him number of debit or credit card"" is already asked: Can merchants tell the difference between a credit card and embossed debit card? Yes they can, and yes there are a few things you can't (or might prefer not to) do with debit. The same could even be said of Visa vs. Mastercard, leading to the conclusion that if you have a Visa debit you should look for a Mastercard credit. But that seems to be less of an issue as time goes on and almost everywhere in Europe apparently takes both or neither. If you travel a lot outside the EU then you might want to be loaded down with every card under the sun, and three different kinds of cash, but you'd already know that without asking ;-)" Is there a debit card accessing this account?  When you spend money on a debit card for certain item, including, but not limited to gas, restaurant, hotel, a bit extra is held in reserve. For example, a $100 restaurant charge might hold $125, to allow for a tip. (You're a generous tipper, right?) The actual sales slips my take days to reconcile.  It's for this reason that I've remarked how credit cards have their place. Using debit cards requires that one have more in their account than they need to spend, especially when taking a trip including hotel costs. In some case the customer wants the name to be cryptic or misleading. They don't want to advertise the true nature of the business they visited. In other cases the transaction may be reported through another business. A few years ago the local PTA was having a silent auction as a fundraiser. A local business allowed the PTA to use their credit card reader to process transactions over a certain amount. Of course when the credit card statement arrived it looked like you spent $500 at the florist. I have seen PayPal listed when donating to some small charities.  I have noted another case where confusion can occur. I used a debit card to buy a soda from a vending machine: the name and location were the name of the vending machine company and the location of their main office. It didn't say  soda machine city A. It said Joe's vending company city B. In most cases the business and the credit card company want to make it easy to identify the transactions to keep the cost of research and charge backs to a minimum. My reason for not using direct debit is #4 on Dheer's list. I just don't know where exactly I'm going to have what balance on what day, because I usually don't leave more than $100-$200 on my checking, all my cash is in Savings. I also don't want to direct debit from Savings in order to not break the 6-withdrawals limit accidentally. I use direct debit to my credit card where its available, but most places charge for that and I don't want to pay the extra fee. So, I prefer to pay my bills manually. What I don't understand is the people who pay the credit card bills when the statement arrives. I haven't received a credit card statement in years. Don't they have on-line access? Can't they set reminders there? If so - throw the card away, and get a normal one. Same with mailing checks, by the way. I'm still not even half done with the free checks I got from Washington Mutual 5 years ago. I almost never write checks. All the bills are paid online, whether through bill-pay service or an ACH transfer. Credited to your account means amount has been deposited to your account(this will be your income). Debited from your account means withdrawn from your account(This will be your expense). Hope this clarifies your question. Regards Jayanthi Cash is king. PIN-based debit transactions are cheap. In terms of credit cards, a regular (ie. not a gold card) with no rewards has the lowest rates.  Bigger merchants with lots of card volume likely have better deals that make the differences less pronounced. If you are solvent enough, and organised enough to pay your credit card bill in full each month, then use the credit card.  There are no disadvantages and several plus points, already mentioned. Use the debit card when you would be surcharged for using the credit card, or where you can negotiate a discount for not subjecting the vendor to credit card commission. For many folks these days, not having a credit card is just not practical. Personally, I do quite a bit of shopping online for things not available locally. Cash is not an option in these cases and I don't want to give out my debit card number. So, a strategy is this: use a credit card for a purchase. Then immediately, or within a couple days, pay the credit card with that amount. Sounds simple but it takes a little effort to do it. This strategy gives you the convenience of a credit card and decreases the interest enormously. "I'll assume United States as the country; the answer may (probably does) vary somewhat if this is not correct.  Also, I preface this with the caveat that I am neither a lawyer nor an accountant.  However, this is my understanding: You must recognize the revenue at the time the credits are purchased (when money changes hands), and charge sales tax on the full amount at that time.  This is because the customer has pre-paid and purchased a service (i.e. the ""credits"", which are units of time available in the application).  This is clearly a complete transaction.  The use of the credits is irrelevant.  This is equivalent to a customer purchasing a box of widgets for future delivery; the payment is made and the widgets are available but have simply not been shipped (and therefore used).  This mirrors many online service providers (say, NetFlix) in business model.   This is different from the case in which a customer purchases a ""gift card"" or ""reloadable debit card"".  In this case, sales tax is NOT collected (because this is technically not a purchase).  Revenue is also not booked at this time.  Instead, the revenue is booked when the gift card's balance is used to pay for a good or service, and at that time the tax is collected (usually from the funds on the card).  To do otherwise would greatly complicate the tax basis (suppose the gift card is used in a different state or county, where sales tax is charged differently?  Suppose the gift card is used to purchase a tax-exempt item?)  For justification, see bankruptcy consideration of the two cases.  In the former, the customer has ""ownership"" of an asset (the credits), which cannot be taken from him (although it might be unusable).  In the latter, the holder of the debit card is technically an unsecured creditor of the company - and is last in line if the company's assets are liquidated for repayment.   Consider also the case where the cost of the ""credits"" is increased part-way through the year (say, from $10 per credit to $20 per credit) or if a discount promotion is applied (buy 5 credits, get one free).  The customer has a ""tangible"" item (one credit) which gets the same functionality regardless of price.  This would be different if instead of ""credits"" you instead maintain an ""account"" where the user deposited $1000 and was billed for usage; in this case you fall back to the ""gift card"" scenario (but usage is charged at the current rate) and revenue is booked when the usage is purchased; similarly, tax is collected on the purchase of the service.  For this model to work, the ""credit"" would likely have to be refundable, and could not expire (see gift cards, above), and must be usable on a variety of ""services"".  You may have particular responsibility in the handling of this ""deposit"" as well." "Yes and No.  There's always a ""fee"".  The difference in credit vs debit usually determines how much that fee is and how it's paid.  Each vendor who accepts the major credit card is under contract to pay for equipment and meet certain standards.  The same is true for debt card transactions.  How much the ""fee"" is can vary based on the contract the vendor has with MasterCard/Visa/AMEX.  But in general most debt transactions go back to the bank who distributed the card." "There may be a confusion here: I don't think you can get cash back at a register with a credit card. See http://www.cardratings.com/can-i-get-cash-back-when-i-buy-something-with-a-credit-card.html Cash back is only available with a debit card. With a debit card, the money comes directly out of your account at the moment of the transaction. With a credit card, the CC company loans the money to you and you get a monthly bill. You can get cash advances at ATM machines, but  typically comes with hefty fees and exorbitant interest rates, so I strongly advice against this.  There are ""Cash  Back"" credit cards, but that means that you get a percentage of your purchases refunded as cash (or points)." "In general, following the W-4 instructions should result in withholdings that are fairly close to the amount of taxes that you will owe for the year, particularly if your situation is relatively uncomplicated. Claiming less withholdings than the form suggests can help ensure that you end up saving money in your ""interest-free IRS savings account"" and get a refund at the end of the year, which some people prefer so they don't need to budget separately for a tax payment. I'm guessing that the HR employee either prefers doing so himself or has on occasion received complaints from other employees that they ""didn't take enough out"". Personally, I'd prefer to claim as many withholdings as I can, and be sure to have some money aside in case it turns out that I have to owe a little bit, since it means I get more take-home pay throughout the year. It's good to keep in mind that a W-4 isn't written in stone. If it turns out that too much or too little is being taken out, you can always change it. You can also try playing around with the IRS withholding calculator to try some scenarios."