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I have both a FSA and commuter expense debit cards issued by their respective management companies.

They both ask that I run eligible expenses as credit cards and not as debit.

Why issue the cards as debit cards in the first place if all charges are "credit" -- or, alternately why not ask us to run them as debit?

Related to but not the same as: What does it mean to run my debit card as credit?

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  • Probably because the vendor wants the extra float time on the funds. IIRC debit transactions clear faster.
    – quid
    Commented Sep 20, 2016 at 16:49
  • @quid - don't the credit middlemen charge a higher fee than debit system?
    – JTP - Apologise to Monica ♦
    Commented Sep 20, 2016 at 16:55
  • @JoeTaxpayer, I think they do, but those fees will pale in comparison to the per member per month fees the FSA vendor is charging the company. I'd imagine the goal here is to have the time to debit the employer's account rather than the vendor floating it's own money. An FSA account is really not the same as an individual account. I'm just speculating but I'd imagine it's about time not cost.
    – quid
    Commented Sep 20, 2016 at 17:01
  • A company only acts when said action increases cash flow. The ones that don't vanish. Therefore the broadest answer is: Because it is advantageous to them if you use the card as credit. I don't know the hows, so I'm posting as a comment.
    – Mindwin Remember Monica
    Commented Sep 20, 2016 at 20:04
  • @Mindwin: But it could be that somehow it is also beneficial to the consumer, which would be desirable to know.
    – Nate Eldredge
    Commented Sep 20, 2016 at 23:00

2 Answers 2

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I have half the answer. The FSA debit card wiki page has some hints:

All such cards to date bear the Visa, MasterCard, or Discover brand and operate through their main networks; thus all FSA debit card transactions are of the offline variety (also known as "signature debit" or, inaccurately but commonly, "credit"). This can create confusion at merchants such as Wal-Mart that attempt to "steer" debit cards to online debit (aka "PIN debit" or just plain "debit"); FSA debit cards will not work that way.[citation needed]

and lower down:

Unlike other debit cards, the IRS does not allow FSA debit cards to be used at every merchant that accepts Visa or MasterCard. Rather, only the following types of merchants may accept an FSA debit card, usually enforced using "merchant category codes" or "merchant type codes" assigned by Visa and MasterCard:

I believe that it's only when going through the VISA/MC/DISC systems (using "signature debit" aka "CREDIT") that the proper merchant name and type codes (or "Merchants with an inventory information approval system (IIAS)") get passed along for approval.

When using DEBIT, the charge may go through other banking systems (CIRRUS/PLUS/ETC) and thus the codes and proper approval mechanisms don't get engaged.

However, this is only half the answer as there's no suggestion as to why the cards aren't just simply provided as CREDIT cards from the beginning.

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Credit and debit transactions run through different networks, and have different fees for vendor and bank associated with them. They also have different kinds of consumer protection associated with them.

A credit transaction is often cheaper for the bank and safer for the buyer, but more expensive for the store. If you have a choice (which isn't always available), you need to decide who you want to be kinder to.

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  • The answer to the question I linked to but not to the question I asked.
    – RoboKaren
    Commented Sep 21, 2016 at 7:45
  • Because not all transactions are credit. When using the card in an ATM, it's more efficient to run it as a withdrawal rather than a cash advance
    – keshlam
    Commented Sep 21, 2016 at 8:01
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    But for this type of card ATM use is blocked. They limit use to only a specific category of vendors and products.
    – mhoran_psprep
    Commented Sep 21, 2016 at 12:31

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