Credit or Debit: Which Payment Option is Best for You?

Credit or Debit: Which Payment Option is Best for You?

We all know the drill. You head to the checkout line and are presented with two options from the cashier—”Will that be on credit or debit?” If you’re like most, there’s a good chance you may not know the difference between the two. While the two may seem identical when it comes to making a purchase, there is a very real difference and it’s a good idea to know which is best to use for various scenarios.

Credit or DebitCredit or Debit: What’s the Difference?

Most of us today carry at least one of two payment options—credit and debit—which to many consumers may seem like analogous options when it comes to making a purchase. However, according to Investopedia, there are big differences. To start “Debit cardsallow bank customers to spend money by drawing on funds that they deposited with the card provider. Credit cardsallow consumers to borrow money from the card issuerup to a certain limit in order to purchase items or withdraw cash.”


With these core differences in mind, it’s important to understand that when it comes to credit or debit, your transactions are processed differently depending on which option you select. For example:

  • Debit:When you select debit, your money is immediately withdrawn from your account and distributed to the vendor.
  • Credit:When you select credit, your payment becomes what is known as an “offline transaction” meaning that the vendor must settle the funds from the credit card processor, which may 2-3 days (hence, there may be a delay in showing the withdrawal of these funds from your account).

Best Times to Use Debit:

By selecting debit, you are required to enter a PIN and since your money is withdrawn immediately, this payment method is the most similar to using cash (an advantage for the vendor you are purchasing from). Now that we have an understanding of how the debit option functions, let’s consider a few scenarios when it may be the best choice for you:

  • When the Vendor Needs to Be Paid Immediately: This may be especially important for small vendors who require fast payment.
  • When You Have Credit Card Debt: If controlled spending is something you struggle with, it’s recommended that you opt for debit, instead of getting in the habit of selecting credit, since the funds are tied directly to actual funds available.

In general, if you’re concerned about your credit score, it’s important to get a handle on your credit sooner rather than later. When it comes to your credit, information is key and it’s important to know where your credit stands. To get started, check out the FICO® Score Program, where you will be able to see your updated FREE score each month. 

  • When Looking for Better Exchange Rates: Using your debit card abroad can be advantageous for getting the best exchange rate. For example, “if you withdraw currency at an ATM with a debit card, you’re more likely to get a wholesale exchange rate and get more foreign currency for your U.S. dollars” (S. News and World Report).

Best Times to Use Credit:

From online shopping to rewards and points, using credit for specific purchases can be a good idea—both in terms of security and financial benefits. Check out the below examples for when it’s a good idea to opt for credit:

  • When Shopping Online:According to Lifehacker,“Credit cards are by far your safest option when shopping online, because the credit card issuers watch for fraudulent charges. If you detect fraud yourself you can dispute a charge and get it reversed quickly, thanks to credit card issuers’ “zero liability” policies.”
  • When You’re Interested in Earning Rewards:From hotel and travel points to cash back, using credit can be especially appealing when it comes to the potential benefits. For example, at American Heritage Credit Union, we offer ScoreCard® Rewards, where you can earn points for valuable merchandise and travel with every dollar you spend using your American HeritageIndependence Debit Card or American Heritage Platinum Mastercard.
  • When You Want More Fraud Protection: If you’re concerned about potential fraud (this is especially applicable for online purchases—where your information is more susceptible to theft), credit may be the better option, with better protection. For example, if you’re a victim of fraud, “your personal liability for fraudulent charges on a credit card can’t exceed $50. But if a fraudster uses your debit card, you could be liable for $500 or more, depending on how quickly you report it” (CNN).

If you have additional questions when it comes to the using credit or debit, don’t hesitate to contact our team at American Heritage Credit Unionand a member of our team would be happy to help. Contactus today.