Reading Time: 3 Minutes
“Honey, we’re out of milk and bread”.
Damnit I think, as I pick up the keys to head over to the shops.
Hmm bread, bread… ah ha – gotcha. Now for some milk… oh look there’s thin-cut potato wedges on sale…
Half an hour later, what was initially a two item shopping list turned into a trolley FULL of groceries which we don’t even need (c’mon Babe, those rubber gloves were on sale).
As I approached the counter to pay with my card, the young lady asked:
“Cheque, Savings or Credit?”
Now, like you – I must have heard this hundreds if not thousands of times over the years.
But I’ve never really understood the difference between the three.
“What’s the difference?” I asked.
“Ummm…”
The difference
Not too much apparently.
You see, after some clever research and a whole bunch of Google searches, I’ve managed to suss it all out.
- Credit. If you are paying via a credit card, press this button (Duh!), although you can also pay using a debit card that can also be used as a credit card (like a debit Mastercard). The card has to be linked to an account relevant to the option you choose in order for the transaction to work.
- Cheque. If you select this option, the funds will be taken out of your everyday transaction or cheque account.
- Savings. If you choose this, the purchase will come out of your savings account, however if there is no savings account linked – then funds are taken out of your everyday transaction account.
So what?
Well, it’s always good to make sure the funds you use for your transaction are withdrawn from the right account.
If your card is linked to multiple accounts, then pressing the right button can make all the difference.
For example, MrsFrugalSamurai has a debit Mastercard linked to an investment property loan.
I have told her time and time again to not use this card for personal purchases, as it would dilute the purpose of the loan and would have an effect on tax consequences come end-of-year.
But you know, nothing but nothing stands in the way between a good woman and her Louboutin’s.
Ducks to avoid the size 5½ ladies Converse aimed at my HEAD.
Pros and Cons
Here’s a good table courtesy of finder.com.au to sum it up:
Did you know…
Oh and before you go, did you know that which option you select also affects the payment process.
Savings and cheque transactions are done through the instant EFTPOS system, while credit transactions are through VISA/Mastercard – these take longer to process.
However, credit cards have the added benefit of having a “chargeback” protection inbuilt. This makes it easier to claim your monies back if there is a problem with the transaction e.g. refunds.
Although, chargeback protections on credit cards are usually passed onto the merchant.
Chargeback protection from EFTPOS is paid for by the merchant provider (usually a bank), so costs the merchant less.
This is part of why stores impose a “credit card surcharge” or minimum credit card transaction spending limits.
Just another reason to make sure you do select the right option when making your purchases!
~~~
Pretty cool right! I for one, wasn’t aware of ANY of this.
Gee thanks TheFrugalSamurai, you’re amazing!
Insert love heart emoji, insert smiley face emoji.
Hope you enjoyed it guys, have a great week ahead!
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50 Comments
Amber
Interesting. I usually pay with my debit card. I do use credit, only to get the points, but I pay it off the following month. I never want a balance. Savings I just add to, I don’t want to spend unless it’s an emergency.
The Frugal Samurai
That’s very very prudent of you! Love it!
Alexandra @ It's Not Complicated Recipes
I like the thought process here! I hadn’t ever thought about weighing up the pros and cons myself, and like you say – it is something we hear so often! I guess you just get used to it. Thanks for the advice!
The Frugal Samurai
No problem, thank you for reading – yeah it’s something we take for granted right!
The Saltbox ZA
this is something my partner and I always end up debating over, especially when it comes to paying bills or accommodation. Thanks for some straight forward tips regarding what to pick when it comes to cheque, savings or credit.
The Frugal Samurai
Thanks! I don’t want to ever get in the middle of a couple but glad that I can help out with any future “disagreements” hahaha, thanks for sharing!
Joanna
I am glad that in England it’s so much easier when it comes to debit and credit cards, and you don’t get all these options on a single card. I prefer using my debit card for everything, because the credit cards always come with interest. In fact, if you don’t have a good credit score, you can’t even get a credit card in England.
The Frugal Samurai
Oh really? I wasn’t aware of the credit score rating in the UK as well! Thanks for that – hmmm very prudent of you to be using the debit card! Love it 🙂
tfrett6
Great information! I used to work in a bank and I think it’s so important to understand the payment methods that are out there!
The Frugal Samurai
Nice one, how was working in a bank for you? You’re one of the lucky ones – who actually knows how not to get screwed over hahaha. Thanks for reading!
Amanda Yorton
This ALWAYS happens to me. I go to the store list in hand and buy a ton of other things. HAHA. I started doing grocery store pick up, then I don’t buy things that aren’t on the list!
The Frugal Samurai
Hahaha glad that someone can relate! But it’s so easy right! Hopefully next time we can both keep our grocery impulse spending in check, thanks for reading!
Neha
Wow! I wasn’t aware of all this stuff in relation to credit cards? Thanks for an awesome share!
The Frugal Samurai
Thank you, I aim to please!
Julie Anna
Great explanation. I always pay with credit (unless the merchant doesn’t accept it or charges a surcharge) in order to collect points/cashback and then pay off the balance through my cheq. account at the end of each cycle to avoid any credit debt.
The Frugal Samurai
Very astute there, how do you find collecting the points, do you use the rewards much? And wow very effective system you got going there!
Julie Anna
Most of my cards are cashback or points for a grocery chain so I often have fully free grocery trips and I get a good amount of cashback totaled in by the end of the year, it’s great!
The Frugal Samurai
Damn, that is clever – was going to do a post on rewards/points but you seem to know all about it! Might need your expertise and advice instead!
Joan
I wasn’t aware of this so this was pretty interesting always used to being asked without knowing what it all entails.
The Frugal Samurai
No worries, thanks for reading! Hopefully we all learnt something here haha!
The Coffee Mom (@Jessi_Sullivan)
I think this is wonderful for people just starting out trying to build credit and move out on their own. I try not to use too many credit cards but they do have pros.
The Frugal Samurai
Yeah that’s true, especially over in the States – heard that your credit rating is CRUCIAL right? So yeah, you are correct! Thanks for reading 🙂
Tara Pittman (@momknowsbest15)
I like using credit for the rewards. I do pay my balance in full and I am smart shopper.
The Frugal Samurai
Nice work with the rewards, do you redeem them often? And don’t doubt your astuteness!
Sarah Bailey
This is a great post to know about the difference in types of accounts, you definitely want to make sure you know where you are paying for those everyday essentials from.
The Frugal Samurai
Thanks for saying so! And yeah – have to make sure that you don’t pay any more fees than you have to!
TheSuperMomLife
I wish I would have never gotten a credit card. You should always pay cash for everything.
The Frugal Samurai
True true, although a fair few of the other commentators mention the credit card points, what about you? Not a fan of the points then?
playinspiredmum
This is a really informative post and great breakdown! Thank you for sharing!
The Frugal Samurai
No problem, glad you enjoyed it!
Corinne ❄️ (@WhatCorinneDid)
I always pay with my debit card. I don’t have a debit card; I used to pay with check back at uni. not sure i want a credit card, too dangerous.
The Frugal Samurai
That’s fair enough, a very prudent way of managing your finances I think, if you don’t borrow, you can’t get into debt!
aisasami
I didn’t know about this. In Japan, we don’t have the cheque option.
The Frugal Samurai
Oooo, how are the payment options in Japan btw? Such a technologically and financially innovative part of the World, would love to find out more!
aisasami
Funny thing is that even though Japan looks like an innovative place, it is still a bit backwards. People still use fax machines and cashless transactions just got popular last year. When I got here in 2012, you had to cash a lot. But now, you can use a card or an app for purchases.
The Frugal Samurai
What the… fax machines? That is VERY interesting to know, thanks for sharing – but honestly I would have thought that it was much more advanced than that, embedded microchips with your financial data or facial scans for bank accounts and the like… but FAX MACHINES! Just wow!
GladysNava
Thanks for letting me know all these to us! Thanks for this post that gives a lot of information!
The Frugal Samurai
No worries, thank you for reading!
Pradnya
I didn’t know a card could be linked to multiple accounts. I generally use my credit card and pay by next month.
The Frugal Samurai
Yeah, was abit of news to me as well! Sounds like you’ve got it under control, no credit card debt for you! Thanks for reading.
Rose A (@mail4rosey)
I use my debit for most things. Sometimes I use the credit card though
The Frugal Samurai
That’s fair enough – use dat credit card for dem points right! I get ya. Thanks for reading!
Echo aka The Mad Mommy
This is important information for people knew to the financial game to know! I sure wish I would have been a little more versed in these things when I was younger.
The Frugal Samurai
It’s never too late to keep going! I’m sure you can be well-versed in the basics in no time!
AlwaysCarryOn.com
Some great tips here! Following this advice should really help everyone have a happier, healthier, more prosperous 2019! X
The Frugal Samurai
It sure will, let’s make 2019 AMAZEBALLS, starting here at TheFrugalSamurai hahaha 🙂 Thanks for reading.
Kiwi
Wow are there people still paying with checks? Also I never heard of someone paying with savings its either debit or credit.
The Frugal Samurai
I know, I know – and yes there are still people like that! My parents are just two of them hahaha. I know of a couple… and no, not my parents! Thanks for reading 🙂
Kayla
I don’t use credit as much, we pretty much only use checking or savings to pay for things.
The Frugal Samurai
That’s fair enough! Very financially astute of you as well! Thanks for reading.