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Neighbors FCU


Credit or Debit? - Tuesday, July 1, 2014
The most common phrase heard at checkout counters is "will that be credit or debit?” but do you know the difference between these two options?

Debit cards, also known as bank cards and check cards, are linked directly to your checking account which means that all purchases will be directly deducted from your account.  Credit cards are an extension of credit from a specific financial institution or company.  Debit cards can be processed as either a "debit” or "credit” purchase, while credit cards will be "credit” purchases.  Here’s how they work.

What is a "debit” purchase with my debit card?
This is an "online transaction” which requires a Personal Identification Number (PIN) authorization; this is the four digit code which is specific to your account.  Purchases are immediately reflected in your account and this system allows the cardholder to access "cash back” with purchases.  This also allows cardholders to use the ATM for cash withdrawals and other transactions.

What is a "credit” purchase with my debit card?
This is an "offline debit purchase” which can be made by debit cards with a Visa or MasterCard logo.  They are used as a Point of Sale (POS) where the cardholder must sign for the purchase.  These transactions may not post to your account immediately, so your account balance might be different than the actual amount of money available for new purchases.  

"Holds” on funds:
Businesses and merchants can place a "hold” on funds in your account to ensure that they receive payment. This is common at fuel pumps, hotels and for car rentals.  You might be able to "see” money in your account, but it’s not available for spending.  It’s been frozen, or put on "hold”, for a previous purchase.  The actual charge will post to your account once the purchase has been finalized.  For instance, paying at the fuel pump may put a $75 "hold” on your account until you have finished pumping your fuel.  Once the pump turns off, the account will resolve itself and only charge you for the amount of fuel you put in your car and the "hold” will be removed.

"Holds” on debit cards:
Because your debit card is linked directly to your checking account, a "hold” could freeze your money causing other purchases to "bounce” and possibly accrue NSF charges while the transactions are settled.

"Holds” on credit card:
With credit cards, a "hold” will be covered by the card’s available credit and the purchase will not be billed until it has posted to your account.  Credit card holds do not affect your personal bank accounts because they are not linked.

Now you know exactly what to ask for at the checkout counter.