Debit or Credit?

Interactive Video

[A woman shopping online with her credit card at a Cyber Monday sale.]

[On screen text:] “Do you know the difference between debit and credit cards?”

Narrator: Do you know the difference between debit and credit cards? Quiz yourself!

[Six questions are presented. Each has two answer choices: (1) debit (2) credit]

1. Which card helps you build a credit history?
2. Which card has an associated interest rate?
3. Which card has no annual fee?
4. Which card can charge overdraft or ATM fees?
5. Which card allows you to pay for a purchase at a later time?
6. Which card best protects your finances from fraud?

Answers:

1. credit
2. credit
3. debit
4. debit
5. credit
6. credit

Feedback (5 or more correct answers): An animated credit card character winks with the text, “Well done!”

Well done! We give you a lot of “credit” for knowing your cards!

Feedback (Less than 5 correct): An animated dollar bill character smiling with the text, “Not bad!”

Not bad! Let’s “deposit” some additional information in your knowledge “bank!”

[A person holding a card in front of a debit/credit card reading machine.]

When you tap or insert your bank card or credit card to buy something, it’s normal for the machine to prompt you to select credit or debit. Does it matter which you choose? [The words, “Credit” and “debit,” appear on screen. The text appears, “Does it matter?”] 

[Animation of a bank card linked to a bank with the card sending electronic waves toward the bank.]

If your bank card offers a debit or credit option, both are linked to your bank account directly. The difference comes down to the way the transaction is processed.

[A person entering a pin number on a debit/credit card reading machine.]

When you select “debit,” you enter your PIN. Funds are instantly withdrawn from your account and transferred to the merchant. Your bank balance drops immediately. 

[An older man, smiling as he holds his card over a card reading machine to make a purchase.]

If you select “credit,” the request goes through a credit network such as Visa or Mastercard and usually adds a fee to be paid by the merchant or customer. [An animation that shows how money is processed when paying with a credit card. The request comes from the merchant and moves through a credit network before reaching the bank.] This process normally takes a day or so, but in the end, the merchant is paid from the money withdrawn from your bank account. [The animation completes with the money going to the merchant.]

[Picture of an animated credit card statement with a shield on the corner of it and a magnifying glass hovering over top of it.]

The credit option does also add a layer of protection against fraud, because there is the delay in funds being withdrawn. This can buy you time to detect and dispute a charge. [The word, “DISPUTE” appears, along with a cell phone displaying a call to the bank.]

[Two button options: credit and debit. A bank account shows a balance of 997$]

Whichever option you choose, remember this payment is deducted from your bank balance. [A cursor selects the “debit” button and “$121” is subtracted from the bank account, changing the balance to “$876.”]

[A woman shopping online with her credit card at a Cyber Monday sale.]

In contrast, when you buy something using a traditional credit card, you are borrowing money. [Text appears, “Credit is borrowing money.”]

[An animation that shows credit card spending in the form of a meter slowly moving toward the $2500 credit limit until the meter is completely full and the line of credit is maxed out.]

Credit cards give you a line of credit with a maximum amount you can charge. 

[A man holding his credit card while looking intently at a paper he is holding.]

You make a credit card payment monthly. You aren’t required to pay everything you owe, but if you don’t, you’ll pay interest on your balance. 

[On Screen Text]: “Debit or credit? Choose which one you should use to pay.”

So when should you use a bank debit, bank credit, or traditional credit card? Think through these scenarios. Select a payment choice based on each person’s situation.

[Scenario 1]:

Select Charlene’s preferred payment method(s).

option 1: bank debit

option 2: bank credit

option 3: traditional credit

Charlene keeps a detailed monthly budget. She keeps close tabs on what she has spent and checks her account balance daily. She doesn’t like to carry any debt. 

[Feedback]: Bank debit is the best option. Charlene’s bank account balance will be updated in real time so she can keep tabs on her remaining balance. She doesn’t have to worry about debt since expenses are paid directly from her bank account.

[Scenario 2]:

Select Ezra’s preferred payment method(s).

Option 1: bank debit

Option 2: bank credit

Option 3: traditional credit

Ezra travels internationally frequently for his job. He has to pay for all his expenses upfront and get reimbursed, because his company doesn’t issue corporate credit cards. He submits expense reports every two weeks. 

[Feedback]: Traditional credit is the best option. Credit cards only need to be paid monthly so Ezra has time to submit his expense report and get paid before he pays anything out of his own pocket. Plus, he gets added protection against potential fraud when he is traveling around the world.

[Scenario 3]:

Select Arlo’s preferred payment method(s).

Option 1: bank debit

Option 2: bank credit

 Option 3: traditional credit.

Arlo has had previous debt issues that negatively impacted his credit score. He’s working hard with a credit counselor to pay down his debt and save money. 

[Feedback]: Either bank debit or credit will work well for Arlo. The key is he is working with the money he has in his account. It gets deducted directly from the account vs. accumulating in his existing credit card balance.