Debit or Credit? The Cashier Doesn’t Know Either

Don’t the guys behind the counter know anything?

We were just in Brooklyn Industries clothing shop. Though we don’t really care for their “near-hip” apparel, our girlfriend bought a skirt.

The cashier asked “debit or credit?” We then got into a little discussion about the difference between debit and credit.

Counter lad said that credit is cheaper than debit for the customer as merchants will sometimes require a transaction fee just like an ATM.

He added that he learned this because he was watching a consumer news bit on TV.

Being the consumer nimnoork we are, we said a further distinction between credit and debit was that debit card purchases were insured up to $50. We also mentioned the power of chargebacks.

He was like, “Oh, I didn’t know that. Learn something new every day.”

We just thought it was a little silly. The cashier only knew anything because he happened to catch a TV program.

As a consumer, make sure you know the difference. The guy manning the card swiper may not have a clue.

(He did hand us an online coupon. Enter code: Watertower06 to save 10% at Brooklyn Industries store)

Comments

Edit Your Comment

  1. homerjay says:

    Who would ever expect a cashier to know all the minute differences between credit and debit?

    Also, what do you mea by “debit card purchases were insured up to $50.”

    Insured in what way?

  2. InvisibleEcho says:

    I’ve heard of incidents recently stating that there have been increased incidents of pin numbers from cards getting into the wrong hands due to negligent practices from stores that carry POS machines. Insurance or no, since debit usually takes directly out of your bank account, a lot of the times it is safer to use credit as no pin number can be lost or acquired insecurely. Plus, credit cards tend to have better structures in place for purchase fraud… dealing with a bank directly about money in your account tends to be harder from personal experience.

  3. MattyMatt says:

    Don’t the guys behind the counter anything?

    Verb: it’s what you do.

  4. catsav says:

    “Our girlfriend bought a skirt”

    Apparently the Consumerist staff shares more than an office.

  5. Kat says:

    Yeah, unless that’s the royal “we” and “our.”

  6. Credit hits the account faster in online banking. You can chargeback a credit card. Credit card purchases are insured with most large credit card companies.

    Debt requires a pin. Debit sometimes has a transaction fee.

    Bad companies can take your ‘debt’card number and process it as a credit card, no pin needed.

    I fail to see why debt it better. But then again, I’m not Consumersist.

  7. notlazyjustdontcare says:

    Oh man, I finally found the site that’ll let me pay $64 for a plaid shirt that “allows you to hold on to the grunge trend that is resurging this fall.”

    Also, “…merchants will sometimes a transaction fee just like an ATM.”

    The verb bandit struck repeatedly in this post.

  8. PsychicPsycho3 says:

    $78 for pants? Apparently sort-of grown up blogger jobs pay well.

    ::returns to his poor work-study college student cave of nigh-poverty.::

  9. timmus says:

    Man, a Consumerist update in the middle of the weekend… what a treat.

  10. mechanismatic says:

    It’s my understanding that debit costs less for the retailer. My bank offers an incentive for doing credit transactions. You accrue money for credit purchases that you eventually redeem. I’m sure they’re making more than enough money somewhere in the scheme to make up for them giving you $25 every few months.

    The credit card system is crazy. The card companies are getting money from both the consumer and the merchant.

  11. Trai_Dep says:

    …guess they ran out of hookers & hooch

  12. Skeptic says:

    Well, actually “debit” and “credit” are sort of misnomers. The banks think of them as being offline and online transactions.

    Banks like offline transactions, aka credit or check card, because using the offline signature-based credit card verification system is cheaper for the bank than a PIN transaction. Most atm cards can be used either way, offline as, say, a Visa “check card” or online as a ATM style debit card. which requires a pin. The debit card transaction requires real time look up of your account information and requires greater infrastructure costs for the bank, which used to be around $.50 or so a transaction for the bank. The offline transactions are far less expensive.

    Many merchants like PIN-based debit card because they can cost them less.

    As a consumer, if you pay off your credit card balance every month, there is no advantage to you for using either ATM or Check Card over an actual credit card in California where merchants generally don’t offer cash discounts. A credit card offers federal legal protections to the customer that are not applicable to “Check Cards” or ATM transactions. For instance if you catch a fraudulent charge on a credit card within 60 days, you have a max. $50 liability. The banks claim to offer the same guarantee for Check Cards, but they offer such protection on a voluntary basis just to stave off legislation and they can skip out of it at there own discretion.

  13. Ben Popken says:

    David writes

    “This is what I know off the top of my head to be true, thus the many maybes, possiblys, and I thinks.

    Debit: funds drawn from the checking account it is linked to. Does not affect credit rating. Can also get cash (I think for no charge), which is handy for those with, say, online checking (and possibly savings) accounts with high interest but no/few(/fee charging, but not sure) ATMs. Can debit cards be used like credit cards? I have no idea. The confusion is probably because the same payment networks (Discover, Visa, American Express, etc) are used for both types of cards The details are probably more pertinent to the merchant than the consumer, anyway. All we do is swipe the damn thing.

    Credit. goes on your monthly bill. Can affect credit rating positively (if paid on time) or negatively (if not). Don’t know if you can get cash when making a purchase with these. As invisible echo said, it’s usually easier to dispute charges and other problems because they have more comprehensive plans for those sorts of things. Chargeback, as Joseph Becher said.

    In both cases I believe the bank or the credit card company will charge the retailer a transaction fee, usually a minimum amount or percentage of the sale. This is why some retailers (though its technically illegal) charge a transaction fee (such as that mom and pop ice cream parlor you blogged about some time ago). Technically, at least in California, a retailer can charge a lower price for cash transactions. Again, that’s more on the retailer’s side, but hopefully knowing this will keep consumers from complaining unnecessarily against smaller retailers.

    If you read the fine print of your card you may also get warranty coverage for certain purchases, fraud protection, or increased virility, for example. (Of course this depends on the card). I like my Citi Platinum Rewards card because I can get 5% back on purchases at grocers, drug stores, and gas stations. I think this is a good site for credit cards: http://www.cardratings.com/cardreviewfr.html I haven’t checked it out thoroughly, though.

    And that, folks, is the difference between credit and debit cards, as far as I know.”

  14. “Don’t know if you can get cash when making a purchase with these.”

    No, at least not in most states. Many credit cards will allow you to take a cash advance in a separate transaction, but they generally charge you twice your interest rate for cash advances.

  15. Ishmael says:

    This is interesting. I just got my latest Consumer Reports magazine, and they had an article about this. CR claims that when using your check card, you should always say “debit” and use your PIN. Their reasoning is that the cashier probably isn’t going to check the signature on the back of your card, and therefore won’t know if the signatures don’t match. They claim it is harder to steal a PIN that forge a signature.

    Response?

  16. Skeptic says:

    Ishmael writes, ” CR claims that when using your check card, you should always say “debit” and use your PIN. Their reasoning is that the cashier probably isn’t going to check the signature on the back of your card, and therefore won’t know if the signatures don’t match. “

    Well, asking to use a PIN based transaction won’t help you! You aren’t going to defraud yourself so it doesn’t matter weather the transaction is signature based or PIN based. The key isn’t when **you** make a transaction but when someone **impersonating you** makes a transaction. If you want added security, do not accept an ATM card with a Visa or Master Card logo from your bank, aka “Check Cards” These cards can be used to suck money out of your checking account without a PIN or any federal protection laws that actual credit cards must abide by.

    CR generally has very sage advice and I would suggest anyone go to the source and read the full details of what they wrote and not go by what small snippet is paraphrased in these comments.

  17. thrillhouse says:

    “If you want added security, do not accept an ATM card with a Visa or Master Card logo from your bank, aka “Check Cards” These cards can be used to suck money out of your checking account without a PIN or any federal protection laws that actual credit cards must abide by”

    Bull. Go to Visa’s website. They have the exact same zero-liability policy on the debt cards as the credit cards. We’ve had several fraudulant charges on our cards over the years, and have never spent more than 3 miutes resolving it on the phone.

    “Credit. goes on your monthly bill. Can affect credit rating positively (if paid on time) or negatively (if not).”

    Ahhhh, now we’re almost there. How about that thing called risk. Or does life not happen to you?

  18. phrygian says:

    When I worked retail, I was told that accepting credit cards cost the store more than debit cards. That’s why stores like them.

    When I was on grand jury last year, almost all the transaction fraud cases involved debit cards or paper checks. That’s why I don’t understand the claims that debit cards are more “secure” than credit cards. Crooks don’t need your PIN to use your debit card number because (like you) they can use it as a credit card.

    My husband’s recent experience of having his debit card number stolen, renewed my desire never to get another debit card. Even if it means I can’t use the ATM. (Not that that’s a big loss for me, considering that my ATM ineptness is the reason I don’t currently have a debit card.)

  19. Skeptic says:

    “Bull. Go to Visa’s website. They have the exact same zero-liability policy on the debt cards as the credit cards. “

    Sorry, no bull. If you read my entire post you would have noted where I wrote, “The banks claim to offer the same guarantee for Check Cards, but they offer such protection on a voluntary basis just to stave off legislation and they can skip out of it at there own discretion.”

    These policies are **voluntary**. As you know, the card issuers change their policies at will but with credit cards, there is the force of federal legislation backing them up.

  20. Skeptic says:

    “When I was on grand jury last year, almost all the transaction fraud cases involved debit cards or paper checks. That’s why I don’t understand the claims that debit cards are more “secure” than credit cards. Crooks don’t need your PIN to use your debit card number because (like you) they can use it as a credit card”

    This is an important point. People use the terms ATM card, debit card and Check Card interchangeably. There are two separate issues going on at once: One is where the money comes from–Credit: billed to you later or Debit: deducted from your account. The other is how the transaction is processed: Signature or PIN.

    Credit cards use signature based transactions. Cheap for the bank to process and expensive for merchants who pay a transaction fee plus a percentage. Lots of fraud but consumer liability is limited by Federal law.

    Check Cards are signature based transactions. They are a form of debit card that looks like a credit card. They have the Visa or Master Card logo but they **are not** credit cards. The money is deducted from your checking account. Federal credit card liability limits **do not apply** to Check Cards due to heavy industry lobbying. Although issuers often tout similar liability limits to credit cards, these limits are voluntary which gives the issuer wide latitude in deciding your claim.

    ATM cards use online, PIN based transactions. Most ATM cards also come with the Visa or Master Card “Check Card” feature. In many instances you can get your bank to issue you an ATM card without the Visa or Mastercard “Check Card” feature. You bank would prefer not to since “Check Card” transaction cost them less than online PIN based transactions.

  21. FLConsumer says:

    For the techno crowd, think of a debit card as having no firewall between your bank account & merchants, thieves, etc. Then think of a credit card as that firewall, an extra layer of protection between your money and the rest of the world. The credit card won’t interfere with your business and offers protection, BUT, much like a firewall, misuse of it will bring you misery.

    The Visa rules are just that — rules, not laws. There are laws regarding credit card use, there aren’t any regarding debit card use.

  22. Ishmael says:

    From CR’s article, page 57:

    2. Limit fraud exposure.
    Debit transactions that use PIN (personal identification number) for approval are 15 times more secure than signature-based transactions, says Tony Hayes, a vice president at Dove Consulting, a Boston financial-services consulting group. That’s because crooks can more easily snooker cashiers with your stolen card and a forged signature.

    CR does usually give very sage advice. That’s why I pay for their magazine and web access. I brought up the contradiction that I saw between here and CR because I thought it was interesting. However, if you’ve been reading CR, you’ve probably noticed that they’re getting a little alarmist/extremist lately. Did you see the article on drain cleaners? No shit Draino is dangerous if you breathe in the fumes or swallow it. And like in the post about the Scrubbing Bubbles Shower Cleaner, they had 12 people test the thing, but only 1 followed the directions and cleaned their shower first. The product never states that it will clean away existing mildew – only delay the growth of new mildew. C’mon guys!

  23. fluxtatic says:

    From my time in retail, my experience was always that debit is more expensive. On credit cards, we were charged ~3% of the transaction amount. On debit, it was ~3% + $.50 per transaction. We ran all cards only as credit, because there was an additional fee to get a PIN pad and the transaction fee was the same. On a side note, we maintained a $5 minimum on cards and people would complain and say it was a violation of the merchant’s agreement. I say, ‘too bad’, because I’m not going to run my store into the ground paying $.51 cents to the bank so you can use your debit card to buy a pack of gum. For the love of God, people, carry $5 or $10 in cash for incidentals like this and don’t put the burden on mom & pop shop owners. It may have been something I would be willing to swallow if I was doing $10,000 or more in sales a day, but that was far from the case.