Credit or debit? No doubt you’ve had a cashier ask you this at some point recently. Perhaps you have paid a bill over the phone and gotten a prompt to choose between processing the bill using a credit card or processing the bill as a debit transaction. If so, you may be wondering exactly what the difference is between a debit card and a credit card.

It can be confusing for consumers to tell the difference between the cards. After all, most debit cards can also be processed as a credit card and usually have a credit card logo at the bottom right hand corner. In addition, most stores take both cards. The main difference between the cards is how they are processed.

A debit card offers consumers the convenience of a credit card except that you might need to use a PIN number or primary identification number in order to complete the transaction. Some stores may process debit transactions under a certain amount automatically and without asking the customer to punch in a PIN number. When you use a debit card to purchase for your items, the money for the transaction is taken out of your bank account immediately. In addition, some banks or financial institutions charge customers a fee when they use their debit card.

A credit card is a card used to get credit or borrow money. When you use your credit card at a store, you are borrowing money from the lender that issued you the credit card. For the privilege of allowing you to borrow money from the card lender, you will be charged interest based upon the amount of money that you have borrowed. When you use a credit card, you will receive a bill each month telling you how much money you have borrowed. You can pay off your bill in full or you can partially pay your bill each month. You are limited as to the amount you can borrow by a credit limit established by the lender.

Of course, you can also use your debit card as a credit card; this is where the lines between debit and credit can get blurry and confusing. When you use your debit card as a credit card, the money used to pay for your purchases will eventually come out of your bank. However, the transaction usually takes a bit longer to process than a debit transaction. In addition, smaller stores may ask that you refrain from using your debit card as a credit card due to the hefty processing fees incurred by merchants when they process such transactions.

Many consumers however choose to use their debit cards as credit cards when given the option simply because it is cheaper to do so. In many cases, consumers will not have to pay transaction fees if they use their debit card as credit. Although fees are minimal, they can really add up quickly. If your bank charges $1 for each debit transaction, you can incur quite a bit of fees over the course of a day if you use your card to pay for your purcharses. Other consumers use their debit cards as credit cards because some banks offer a cash back option on all transactions processed as credit.

Debit or credit? That is a good question. Know the facts and make your choice carefully before you swipe that card.