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Can I make debit payments with a credit card?

When checking out at a store and presenting your payment card, you may have been asked if you prefer “debit or credit.” Does this mean you can make debit payments with a credit card or vice versa? While you can use debit and credit cards to make the same types of purchases, what’s the difference between the two? Find out when to use debit and credit cards below.

Debit and credit payments: what’s the difference?

A debit card is tied to an existing source of funds, usually your checking account. There are also prepaid debit cards, while others are tied to savings accounts. By contrast, credit cards allow you to make a purchase on credit, with the understanding that you will pay back the lender at a later date.

When you’re asked at the register if you’d like to make a debit or credit payment on your debit card, it doesn’t mean that you can borrow money from a lender. Instead, this question is referring to how the payment will be processed. Here’s a look at how the two methods differ:

Debit card transactions

  • You must enter your PIN number

  • You can usually request cash back

  • The purchase is processed electronically

  • Merchant processing fees are lower

  • The transaction is processed immediately

  • There is usually no customer fee involved

Credit card transactions

  • Uses a signature as verification

  • Purchase is processed through credit card networks

  • Merchant processing fees are higher

  • The charge may take several business days

  • A hold might be placed on your account until it’s authorized

As you can see, there are advantages to making debit card payments both for the consumer and merchant. Transactions are completed immediately or within the same business day, with lower fees for both parties. With prepaid debit cards, you know exactly what you’re spending without worrying about how much is in the bank.

At the same time, using a credit card means you don’t have to run the risk of exposing your PIN number. This is why some consumers choose to have their debit cards processed as a credit transaction at the register. Some additional security is provided when making payments in person, though this is unnecessary for online payments.

Can you make debit payments on a credit card?

As we’ve explored above, your credit card is not tied to an existing source of money like a bank account, so you can’t use it to make debit payments.

However, you can use your credit card to sign up for recurring payments. For example, you might submit your credit card details to sign up for a subscription entertainment service like Netflix, a month-to-month gym membership, or to pay certain utility bills. The money will be charged to your credit account on a recurring basis, working in a similar fashion as direct debits.

You can also use your debit card to access a quick line of credit by signing up for overdraft protection with your bank. This allows you to use your card up to a predetermined limit even if you don’t immediately have the funds in your account. You’ll be expected to rectify the situation quickly and there’s usually a hefty overdraft fee to pay. For this reason, it’s better to use a credit card with a favorable rate rather than relying on an overdraft for credit.

Reasons to use business credit cards

Though you can’t use them to make debit payments, there are still advantages associated with using business credit cards:

  • They can help you build a positive credit history

  • They might offer warranties on big-ticket expenses

  • They offer additional fraud protection in comparison to debit cards

  • Some business credit cards come with perks like airline miles and freebies

  • The Fair Credit Billing Act allows you to dispute unauthorized purchases

Yet you should always be cautious of taking on more debt than you can easily repay as a business. It’s also important to look at fee structures carefully. Introductory rates might be low, but you should also consider interest rate hikes to avoid getting hit with an unexpected bill down the line.

We can help

GoCardless helps you automate payment collection, cutting down on the amount of admin your team needs to deal with when chasing invoices. Find out how GoCardless can help you with ad hoc payments or recurring payments.

GoCardless is used by over 55,000 businesses around the world. Learn more about how you can improve payment processing at your business today.

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