What happens when you run your debit card as credit

We’ve all been there. You’re checking out at the store; you insert your chip-enabled debit card and the machine gives you the choice to run it as a debit or credit. Before you make a choice, understand what it is you’re choosing.

The difference between debit cards and credit cards

A debit card is tied to existing money. When you make a purchase, the money is transferred directly from your account. A credit card is tied to a line of credit with a credit limit; you’re borrowing the money from the financial institution that gave you the card, and you have to repay that loan when you get your monthly bill.

Does that mean if you run your debit card as a credit that you can borrow money from the bank and pay it back later? In a word: No.

Your debit card is not a credit card

Debit transactions take the money from your account immediately. When you run your debit card as a credit, the money also comes out of your account, just a little bit more slowly.

When you select the debit option, your information is sent through an electronic funds transfer (EFT) network. The EFT network authorizes, clears and settles your transaction with a single transmission. Your account will reflect the purchase very quickly.

With credit transactions, the information gets routed through the networks that credit cards use, and it can take a few days for the transaction to be cleared and settled. It will show as pending on your account during that time, but once it clears, the money will be taken from your account.

You cannot borrow money from the bank with a debit card

With a credit card, you can make a purchase as long as you have not reached your credit limit. You are borrowing from the bank and repaying with future money.

With a debit card – even if you choose to run it as a credit – the money comes out of your account. If there is no money in your account, and you have not opted in for Courtesy Payment for your debit transactions, the credit union would deny your purchase. If you have opted in for Courtesy Payment, the credit union may authorize your purchase but you may have to pay overdraft fees.

Using your debit card does not build your credit score

Paying with your debit card doesn’t impact your credit score regardless of whether you choose debit or credit. Your debit card represents money you already have. It’s not credit, and it doesn’t reflect on your ability to make timely payments or use credit responsibly. Because of this, it does not impact your credit score.

If you want to build credit, consider getting and using a credit card. Oregon State Credit Union has two options for you: a Visa® Value card with no annual fee, no balance transfer fee and no penalty interest rate; and a Visa Rewards card that pays Rewards Points every time you use it.

Other differences

• You may have to enter a PIN to complete a debit transaction. Don’t forget to cover your hand as you enter the PIN.
• You may be able to withdraw cash from your account when you run the transaction as a PIN-based debit.
• If you run your card as a credit, you don’t have to remember your PIN.
• If you frequently overdraft your account, the speed of the debit transaction may help you keep accurate track of your available funds.

For consumers, there is no significant difference between using your card as a debit or credit. It’s not a credit card transaction, it won’t help you build a credit history and the money still comes out of your account, even if it takes a few days.

Back to financial education resources