I always wondered why when you use a card for a purchase you are asked on the screen “Debit or Credit?” Doesn’t the machine know? Isn’t it encoded in the card?
This nifty article by Patrick McKenzie explains that and more about how ATMs work. It’s much more complex than I had thought but makes a lot of sense. Essentially debit and credit use two different networks for payment so the question is really about which network you want to use.
There are many other interesting tidbits in the article including why it makes sense for groceries to offer cash back with a purchase. It’s all about the expense of handing cash.
An excellent and well written piece.