Can I make debit payments with a credit card?
Find out when to use debit and credit cards below. 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 youre asked at the register if youd like to make a debit or credit payment on your debit card, it doesnt mean that you can borrow money from a lender. Instead, this question is referring to how the payment will be processed. Heres 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 its 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 youre spending without worrying about how much is in the bank. At the same time, using a credit card means you dont 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. As weve explored above, your credit card is not tied to an existing source of money like a bank account, so you cant 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 dont immediately have the funds in your account. Youll be expected to rectify the situation quickly and theres usually a hefty overdraft fee to pay. For this reason, its 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 cant 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. Its 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.