Cheque, savings or credit?

When paying with a debit card, you're given a choice of cheque, savings or credit. What should you choose?
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01.Cheque savings or credit

Credit card

An increasing number of financial institutions now offer debit cards that can be used for transactions through both the Scheme (MasterCard or Visa) and EFTPOS systems.

If you have one of these cards, your decision about which button to press at the retailer's payment terminal determines which system your transaction goes through and what costs are paid behind the scenes.

When your debit card is swiped, you generally have three options:

  • cheque
  • savings
  • credit

If you press Cheque or Savings, your transaction will be processed through the EFTPOS system after you enter your PIN. This means your bank will pay a flat fee — for example 5 cents — to the retailer’s bank.

However, if you press Credit, the transaction goes through the MasterCard or Visa scheme system. A MasterCard or Visa fee is paid by the retailer’s bank. “Chargeback” protection may also apply — handy when a retailer or manufacturer goes out of business but still owes you a product or money.

According to the Australian Merchants Payments Forum (AMPF), retailers prefer customers to press cheque or savings, as the costs for the retailer are lower (two or three of the largest retailers even receive a fee for EFTPOS transactions). “Banks, on the other hand, make more money when the Credit button is pressed,” says Russell Zimmerman, AMPF Chair.

David Bell, Chief Executive of the Australian Bankers' Association, points out that scheme debit card fees are regulated by the Reserve Bank. EFTPOS interchange fees are also regulated.

Please note: this information was current as of July 2009 but is still a useful guide to today's market..



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