I've always wondered why there is a choice (other than the option for cash back) between debit and cash. Either way, the retailer befits more from cash transactions.
First we need to clarify something: just because you select "credit" and sign with your debit card, you're not really making a credit card purchase. The money is still drafted from your account directly, it just takes a little longer. This method of using your debit card is called a signature debit, and it's cleared via a different network than when you pay by punching in your PIN (which, logically, is called a pin debit).
Merchants have to pay more money for signature debit transactions than for pin debit ones. It's in the card issuer's interest to get you to use the debit card in the way that will generate the highest fees. If you're going to pay with debit anyway, it's cheaper on the merchant if you go the pin route.
Remember, though, that paying with a real credit card conveys certain benefits. It may give you more protection in terms of disputes or extended warranties, and in cases where the merchant places a hold—hotels and car rentals, for example—a real credit card will prevent your checking funds from being frozen indefinitely. Your bank may in fact extend those benefits to any signature debit transactions on your debit card, but you'll have to contact your bank to find out.
Wednesday, March 25, 2009
Another Reason to Consider a Cash Only Life
From the Consumerist: