Credit or Debit?

Have you been to the gas pump lately? Have you been as perplexed as I am by the question you first get asked at the display?

CREDIT or DEBIT?

The reason this bothers me is because I thought they were supposed to be the same thing. I mean, I know that my debit card is tied to my checking account, and my credit card is tied to a bill I receive each month, but what difference does that make to the machine that is processing my card? Here’s my decision tree each time I fill up my car:

If I’m using my DEBIT card,
     If I press the DEBIT button, I have to enter my PIN. Then it works.
     If I press the CREDIT button, it just works. No extra step. No extra cost.
If I’m using my CREDIT card,
     If I press the DEBIT button, it’s not going to work. Because it’s not a debit card.
     If I press the CREDIT button, it just works. No extra step. No extra cost.

So why, then, is there a choice for me? I’m not invested whatsoever in the outcome of this transaction, other than the total cost of the gasoline. My guess is that there’s probably a different cost structure for each transaction for the gas station. Let’s guess $1.50 per CREDIT transaction, and only $1.00 per DEBIT transaction. I have no real idea what the costs are, only that they are probably different.

So then why does the station offer a choice? Well, much like building an HTML and a Flash version of a site, you’re never sure that people will have a credit OR a DEBIT card. So you need to provide options for both.

But what still bothers me about that is this: If you were just to process all of the transactions as credit, you’d take an entire confusing step away from your users. So my question to all of you is this: Why do we get this silly choice?

If I have to answer a silly question, why not make it something useful for me? Often times when I am traveling, I know I’m going to get gas AND run inside for something to eat/drink. But many pumps require me to swipe my card before I can pump gas. So my choices are:

1) Go inside first, then do the gas.

2) Pump gas in one transaction, pay for snacks with another.

3) Skip the Red Bull and give my heart a rest.

I’m not really a fan of any of those. Why not give me a prompt similar to:

Getting snacks? Just tell the cashier your pump number and we’ll add it to your puchase! (You’re on pump #3).

It cuts down on the number of costly transactions for the gas station, and simplifies my life. Win-win! (By the way, for each transaction that uses this methodology, I will expect $0.25 from the gas station that stole my idea.) 🙂

9 thoughts on “Credit or Debit?

  1. For the gas station (as with most businesses) a debit transaction is cheaper to run than a credit transaction. So yes, one would assume that it would be in their best interest to automatically run it as a debit transaction if it is a debit card, taking away the step of prompting the user and making their transactions cheaper. The main reason they don’t do this is exactly what people have stated. Some banks will charge their customers to use their debit card as a debit card (go figure). So, the gas station can’t/won’t take that liability. If you choose debit, and then your bank charges you, you can’t go after the gas station. You were asked if it could be run as debit, and you chose that yourself. While you might be thinking “but if it’s just 25 cents…”, imagine a scenario where that 25 cent debit fee pushes someone’s bank account into overdraft. If the customer said to run it as debit, they can’t cry foul back to the gas station.As to detecting if its a debit card or credit card, you may not be able to detect that from the numbers or the magnetic strip, but you can absolutely obtain the card type from your processing company. Most systems I’ve worked on go out and detect the card type first, independent of the actual money transaction ran. Then you can only prompt the user when its a debit card. If its credit, run it as credit. If its debit, give the user the choice.So that said, I’m the opposite of you. If I go somewhere and use my debit card, and the machine does not prompt me, I find that peculiar. It means they ran it as credit, which costs them more. When prompted, I always choose debit. I figure I’d rather have more money in the hands of the business than the banks. Banks today have too much money and too much power as it is. They certainly don’t need more.

  2. The problem lies in the magnetic strip data. It’s stored in three tracks as delimited strings, with standards defining each track. IIRC, those standards don’t differentiate between a “credit” or “debit” card, as cards can be dual-purposed. With no way to tell the difference, getting rid of that extra step means choosing not to support debit cards.

  3. Debit is cheaper for the business owner. The funds come out of your account immediately. This helps some people manage their accounts better. In the old days, there was a 25 cent charge that your bank would hit you with for debits so although it was cheaper for the business, it cost you.Credit is more expensive for the business and sometimes doesn’t hit your account immediately. Some people on tight budgets use the hopeful delay in processing credit to skate their accounts a bit. Personally I think the days of “debit or credit?” need to go away.

  4. There’s another aspect that is specific to the gas industry, since gas has an extremely low margin (3-5%) if they can force you to pick debit, it gives them more profit. However, since each transaction has a fixed cost (usually something like $.25- $.50) in addition to a percentage, you would think they would try to make it easier to combine transactions.On a weirder note, CC companies know that fraudulent purchases usually start at the gas pump.

  5. I just thought I would add option number four to the gas/snacks list.4.) Don’t use your CC at the pump and choose to pay inside. Go inside, choose your snacks pay for both a the register. (Of course this only works if it’s not a prepaid pump, in that case, default to your new method)In regards to stating if Credit or Debit. IMHO, I suggest always stating “credit”. It’s a cheaper cost to the customer (in most cases), and the business should assume the higher transaction cost as the cost of doing business.

  6. When we purchased our barn from Beachy Barns the owner told me that if they do a debit transaction, it costs him nothing for the transaction. If they do a credit transaction it costs him between 1% and 3%. But of course no one wants to do a debit transaction because they want the miles.

  7. Things are even weirder for us 5/3 folks. My card clearly says “Debit” right on the front, but won’t actually work as a debit card in most places. So far, I’ve determined that WalMart and Lowes can handle it, but virtually everywhere else I have to use it as a credit card… so I just don’t bother anymore. It’s used as a credit card everywhere.

  8. My Debit card can be used as either a credit or debit card. Same question at the grocery store. If I use debit, I can get cash back though.

  9. My bank charges me $0.25 every time I use my card as a debit card. So it actually costs me more to use choose debit.I think the logic is that the transaction is guaranteed by Visa if I use it as credit instead of debit and it shifts the liability around if I should report my card stolen.Either way, I agree – it’s ridiculous.

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