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We’ve all been there: You’re at the register paying for that long-coveted purchase. You swipe your ATM/debit card and the touch screen asks, “Credit or Debit?”  If you’re like most people, you make a choice without investing too much brainpower, but do you really know the difference between one choice and another?  When is credit better than debit—and the other way around?

If you’re paying with your ATM/debit card, one thing is always the same:  Any credit or debit transaction you make will result in money coming directly out of your checking account.  “Credit” transactions are not true credit; payments do not become part of a revolving account, as a regular credit card transaction would.  There is no interest and no monthly payments.  In this way, “credit” and “debit” charges on your ATM/debit card are largely interchangeable, and in most cases either choice is perfectly acceptable.

There are a few differences, however:


  • You want cash back.  If your shopping day isn’t even half over and you don’t have the cash for a triple latte, this is the choice for you.
  • You like the security of using a PIN.  PIN based transactions are much less likely to be fraudulent than signature-based ones. 
  • Your transaction is small.  ATM/debit cards carry a limit on purchases and withdrawals.  If you’re purchasing a big-ticket item, you may exceed your daily spending limit—or send the remainder of the day’s transactions into limbo.
  • Your account is flush.  Debit purchases are instantly taken out of your account, just like an ATM transaction.  There’s no time to “beat the bank.”
  • More Expensive to the Credit Union.  The debit networks charge more to the Credit Union to process a transaction. To help reduce Credit Union expenses, choose “Credit”.


  • You want increased fraud protection.  VISA and MasterCard have zero liability policies on debit card purchases that are processed as “credit,” meaning you have signed for your purchase rather than punching in a PIN.
  • Your purchase is big.  Because of smaller limits imposed when using PIN transactions, larger purchases are more likely to be authorized using signature debit.  Keep in mind that there are still limits to the “credit” side of an ATM/Debit card; it’s best to confirm this limit prior making that big-ticket item purchase.
  • Less Expensive to the Credit Union.  The Visa network charges less to the Credit Union to process a transaction, so select “Credit” to help keep Credit Union costs low.

Bear in mind that some retailers charge a fee for either one or both “credit” and “debit” services.  To avoid excess fees and unwelcome surprises, ask the retailer what fees may apply prior to making a choice between debit and credit.  You’ll also avoid excess fees by making sure you have adequate funds to cover any and all purchases you make, credit or debit, before you hit “enter.”  Adding an overdraft charge to the purchase of price of any item can turn the best bargain into a splurge.