Those familiar with using a debit card will recognize with the question "credit or debit."  Since it is a debit card, would it not make sense to answer debit?  In fact, debit cardholders have a choice in the matter.  One can simply run the transaction as a credit and sign the receipt or as a debit charge that will require a personal identification number.   

Even though the decision seems like a simple one for the cardholder, the topic of credit versus debit has been greatly debated in recent events.  Among the dispute are credit card companies that claim interchange fees are necessary to pay for the cost of processing the transactions and provide fraud protection, and merchants who suggest that interchange fees by large banks are cutting into their profits.   

Debit card transactions are processed as an electronic funds transfer or EFT.  Such processes deduct the finances from your checking account instantaneously similar to ATM transactions.  Online debit card transactions will require a PIN number and allow cardholders to receive cash back.   

Credit card transactions are labeled as signature-debit transaction or offline transactions.  They do not require the use of a PIN and requires the cardholder to sign a receipt to complete the transaction.  A credit card transaction goes through one of the credit card digital networks such as MasterCard, Visa, Discover, or American Express.   

Both credit and debit card transactions come with the convenience of paying with a card and such features as overdraft protection.  The source of the debate is the differences in hidden fees collected for each type of transaction.   

These hidden charges, or better known as interchange fees, account for over twenty billion dollars in annual processing fees that merchants have to pay for the privilege of accepting plastic payment.  Offline transactions typically involve an interchange fee of three percent while online transactions cost a mere one percent.  Of the two types of transactions, merchants usually will prefer debit payments because they can keep a higher percentage of the transaction total.  On the other hand, banks use the high swipe fee percentage for credit cards to pay for rewards, cash back offers, and other incentives.