What happens if I run a debit card as credit?

Using a Debit Card as Credit: Understanding the Implications

Debit cards are a convenient payment method that allows you to access funds directly from your checking account. However, some retailers offer the option to run a debit card as credit. While this may seem like a convenient way to make larger purchases, it’s important to understand the implications of doing so.

What Happens When You Run a Debit Card as Credit?

When you use your debit card as credit, the funds are not immediately withdrawn from your checking account. Instead, they are authorized, similar to how a credit card works. However, unlike a credit card, which provides a grace period before you have to pay, using a debit card as credit draws funds directly from your checking account when the transaction is processed.

This means that if you run your debit card as credit, the funds will be deducted from your checking account within a few business days, regardless of whether you use the debit card’s credit feature or not. It’s important to note that this can result in overdraft fees if you do not have sufficient funds in your account.

Implications of Using a Debit Card as Credit

• Overdraft fees: Running your debit card as credit without sufficient funds in your account can lead to overdraft fees. These fees can vary depending on your bank, but they can be substantial.
• Reduced protection: Debit cards typically offer less protection against fraud than credit cards. If you use your debit card as credit and it is compromised, you may be liable for unauthorized purchases.
• Reduced credit score: Using a debit card as credit does not help you build your credit score, as it is not reported to credit bureaus. If you are looking to improve your credit score, using a credit card and making on-time payments is a more effective strategy.

When to Use a Debit Card as Credit

While it’s generally not recommended to use a debit card as credit, there may be some specific situations where it makes sense. For example, if you are making a large purchase and do not have sufficient funds in your checking account, using a debit card as credit may be an option, provided that you are aware of the potential risks and fees involved.

Conclusion

Using a debit card as credit can be convenient, but it’s important to understand the implications before doing so. You should be aware of the potential for overdraft fees, reduced protection against fraud, and lack of credit score benefit. If you need to make a large purchase and do not have sufficient funds in your checking account, it may be better to use a credit card or explore other financing options.