What's the difference when asked for “debit or credit” by a store when using credit and debit cards?
"These are two different ways of processing payments. They go through different systems many times, and are treated differently by the banks, credit card issuers and the stores. Merchants pay different fees on transactions paid by debit cards and by credit cards. Debit transactions require PIN, and are deducted from your bank account directly. In order to achieve that, the transaction has to reach the bank in real time, otherwise it will be declined. This means, that the merchant has to have a line of communications open to the relevant processor, that in turn has to be able to connect to the bank and get the authorization - all that while on-line. The bank verifies the PIN, authorizes the transaction, and deducts the amount from your account, while you're still at the counter. Many times these transactions cannot be reversed, and the fraud protections and warranties are different from credit transactions. Credit transactions don't have to go to your card issuer at all. The merchant can accept credit payment without calling anyone, and without getting prior authorizations. Even if the merchant sends the transaction for authorization with its processor, if the processor cannot reach the issuing bank - they can still approve the transaction under certain conditions. This is, however, never true with debit cards (even if used as ""credit""). They're not deducted from your bank account, but accumulated on your credit card account. They're posted there when the actual transaction reaches the card issuer, which may be many days (and even many months) after the transaction took place. Credit transactions can be reversed (in some cases very easily), and enjoy from a higher level of fraud protection. In some countries (and most, if not all, of the EU) fraudulent credit transactions are never the consumer's problem, always the bank's. Not so with debit transactions. Banks may be encouraging you to use debit for several reasons: Merchants will probably prefer credit because: Consumers will probably be better off with credit because:" It depends on your bank and your terms of service, but using the card one way or the other may affect things such as how long it takes to process, what buyer protections you have, etc.  It also affects the store as I believe they are charged differently for debit vs credit transactions. "When using a debit card in a ""credit"" way, you don't need to enter your PIN, which protects you from skimmers and similar nastiness. Also, assuming it's a Visa or Mastercard debit card, you now have access to all of the fraud protection and other things that you would get with a credit card. The downside for the merchant is that credit card transaction fees are typically higher than debit card transaction fees. I'm less familiar with using a credit card in a ""debit"" way, so don't have anything to offer on that part of your question." I'm surprised by all the pro-credit answers here, debit has some definite advantages. Most importantly, when you pay with a credit card, the merchant pays around 3% of the transaction to the credit company. In many states, they are forced to charge you the same amount, and this is frequently toted as ''consumer protection''. But consider what this means for the business: they loose money for every credit transaction, and they're legally forbidden to do anything about it. So you're taking 3% from a business and handing it over to a massive cooperation.  To make matters worse, the buisness is inevitably going to have to raise their prices (albiet by a small amount), so in the end the average consumer has gained nothing. On the other hand, the credit card company wins big, and they use their profits to pay lobbyists and lawyers to keep these rules in place. To put in the worst possible light, it's essentially legal extortion, verging on corruption. As for the fraud protection offered, while it may be true that credit cards will offer a more hassle-free reimbursement (i.e. you just don't have to pay the bill) if your card is stolen, consumer protection laws also extend to debit: in many cases your bank is legally required to cut you a check for all the money you lost. "Just to add about using debit card as ""credit"" vs ""debit"" way: In addition to the difference of having to enter the PIN when using ""debit"" mode (vs having to sign in ""credit"" mode), for stores that offer cash back (i.e. get cash out of your account at the same time as paying), you can only get cash back when using ""debit"" mode." Credit in debit way - the card simply functions like a debit card for that transaction - pulling cash from your checking account. No difference.  You've simply discovered the fact that some banks are using the same piece of plastic for two functions, debit which draws funds directly from your checking, and credit which offers you time to pay a bill the comes in some time later. It's a personal choice.
Assuming that it's not inventory that is sold in the following year or a depreciable asset, you can deduct it when you make the purchase. The courts have ruled that credit cards balances are considered debt. It's treated the same way as if you went to the bank, got a loan, and used cash or a check to purchase the items. On your accounting books, you would debit the expense account and credit the credit card liability account. This is only for credit cards, which are considered loans. If you use a store charge card, then you cannot deduct it until you pay. Those are considered accounts payable.  I'm an IRS agent and a CPA. "Credit cards have three important advantages. None of them are for day-to-day borrowing of money. Safety - Credit cards have better fraud protection than checks or cash, and better than most debit/check cards. If you buy something with a credit card, you also get the issuer's (think Visa) assurances that your will get the product you paid for, or your money back. At almost any time, if a product you buy is not what you expect, you can work with the issuer, even if the store says ""screw you"". Security - Credit cards are almost universally accepted as a ""security"" against damages to the vendor. Hotels, car rentals, boat rentals etc. will accept a credit card as a means of securing their interests. Without that, you may have to make huge deposits, or not be able to rent at all. For example, in my area (touristy) you can not rent a car on debit or cash. You must use a credit card. Around here most hotel rooms require a credit card as well. This is different from area to area, but credit cards are nearly universally accepted. Emergencies - If you're using your credit card properly, then you have some extra padding when stuff goes wrong. For example, it may be cheaper to place a bill on a credit card for a couple months while you recover from a car accident, than to deplete your bank account and have to pay fees. Bonus - Some cards have perks, like miles, points, or cash back. Some can be very beneficial. You need to be careful about the rules with these bonuses. For example, some cards only give you points if you carry a balance. Some only give miles if you shop at certain stores. But if you have a good one, these can be pretty fantastic. A 3% cash back on purchases can make a large difference over time." No. You will need to call your credit card issuer and ask for a credit limit increase.  If you plan to pay off your card then I see no problem in this. You could also ask the seller if they will put $1000 on your card, and $500 in cash.  (Ask for a cash discount too.) Found some anecdotes! http://ask.metafilter.com/143018/Can-I-prepay-my-credit-card-and-use-it-like-a-debit-card-to-help-me-spend-more-responsibly#2047093 http://ficoforums.myfico.com/t5/Credit-Cards/Can-I-prepay-to-increase-limit/m-p/670376#M214222 "To answer your question as clarified in a comment: All I wanted to know what will happen if I enter my debit card number in the sixteen digit account number they offer on the application for balance transfer. That's all. Almost certainly (subject to the particular terms and conditions of the offer), no money will move, the only question is exactly when and how they will say no. If you do it online, and their system is clever enough to look up the IIN (the first six digits) of the card number you enter, their system might learn straight away that you  have entered a debit card number (eg a card starting 431940 is a Bank of Ireland debit card). Otherwise, you'll have to wait until the request goes to their back office system, which will eventually lead to the card issuer's system being contacted, at which point it will become clear that it's a debit card, and your transfer request will be refused at that point. That said, some credit card companies do offer a ""Money Transfer"" aka ""Super Balance Transfer"", which is an offer to transfer money directly into a bank account, putting the resulting debt on the credit card. I've never seen these offered without having to call a service centre and talk to a person, though, presumably so that they can check that the details they have for you (about income etc) are still correct." My view is from the Netherlands, a EU country. Con: Credit cards are more risky. If someone finds your card, they can use it for online purchases without knowing any PIN, just by entering the card number, expiration date, and security code on the back. Worse, sometimes that information is stored in databases, and those get stolen by hackers! Also, you can have agreed to do periodic payments on some website and forgot about them, stopped using the service, and be surprised about the charge later. Debit cards usually need some kind of device that requires your PIN to do online payments (the ones I have in the Netherlands do, anyway), and automated periodic payments are authorized at your bank where you can get an overview of the currently active ones. Con: Banks get a percentage of each credit card payment. Unlike debit cards where companies usually pay a tiny fixed fee for each transaction (of, say, half a cent), credit card payments usually cost them a percentage and it comes to much more, a significant part of the profit margin. I feel this is just wrong. Con: automatic monthly payment can come at an unexpected moment With debit cards, the amount is withdrawn immediately and if the money isn't there, you get an error message allowing you to pay some other way (credit card after all, other bank account, cash, etc). When a recent monthly payment from my credit card was due to be charged from my bank account recently, someone else had been paid from it earlier that day and the money wasn't there. So I had to pay interest, on something I bought weeks ago... Pro: Credit cards apparently have some kind of insurance. I've never used this and don't know how it works, but apparently you can get your money back easily after fraudulent charges. Pro: Credit cards can be more easily used internationally for online purchases I don't know how it is with Visa or MC-issued debit cards, but many US sites accept only cards that have number/expiration date/security code and thus my normal bank account debit card isn't useable. Conclusion: definitely have one, but only use it when absolutely necessary. I'm aware of how credit cards work, in fact I basically said the same thing in my original comment.  &gt;because you get this nifty smartphone pluggable credit card swiper, you end up paying more than the alternate options. Granted I am in no way knowledgeable of the alternates (as in, mobile credit card machines?), but I assume they aren't as easy to set up.  -Square costs more -Other options aren't easy  I guess my inquiry should be more targeted towards how regular credit card transactions are processed in the mobile space.  Honestly I have no idea, and I assume that's why Square is popular.  I still see some places at the farmers market with the carbon copy slider thing, but then I also see some rocking what seems to be a regular credit card swiping gizmo.  Making 0% on a nonsale vs 90% on a square sale obviously makes sense, but I'm wondering if there's a less convenient, although more profitable sale (regular 97% Visa/MC) that people simply aren't aware of. Lots of places in the US do it.  Although the way that they usually phrase it is 'prices reflect a x.x% discount for cash' since most of the credit card companies have an agreement that says you cannot charge a surcharge if someone is using a credit card.  So they get around it by giving a discount for cash.   effect is the same, but it skirts the letter of the agreement I have to second what the poster said above me. The person at the dealership is outright lying to you, and I really don't know where the misconception comes from. I work in finance and specialize in credit. Credit is your ability to repay. Simple as that. To lenders, constant carrying a balance on your credit cards looks like your don't have the ability/discipline to repay your debt and will look bad in the future if you are ever trying to borrow more.