When is it Better to Use a Credit Card Rather than a Debit card?

[bobbyw24]

by Kim Fusaro, Little Miss Fortune, Glamour, on Tue Oct 27, 2009 8:02am PDT


It may be time to defrost my frozen credit cards. It turns out that using a debit card for every purchase—which I’m so guilty of!—is a bad idea.

From the smarty-pants over at ShopSmart, here are the do's and don’ts of using a debit card:

DON’T use debit cards for big purchases. They don’t offer the same protection that credit cards do. Credit cards allow you to reverse or dispute charges, and some will even extend the length of warranties.

DON’T use a debit card online. If you use a credit card, your liability for unauthorized charges is capped at $50, no matter what. If your debit card is lost or stolen, it must be reported within two business days to limit liability to $50. If a lost or stolen debit card is reported within 60 days, liability can go up to $500. If an unauthorized transaction is not reported within 60 days of the statement date (and the card hasn’t been reported lost or stolen), you’re on the hook for charges made after the 60th day until the report is made.


DO click on “credit” and sign for payments instead of giving a PIN. Card companies might extend the same zero-liability protection to debit cards as they do to credit cards if the debit cards are processed like the latter, but PIN transactions might not have that protection.

DON’T link your debit card to an account with a lot of money. Thieves can empty your debit-card-linked checking account, so keep just enough in the account to cover current purchases.

Eek! I’m guilty of all of the above! Regularly!

How ’bout you guys? Who else has broken these rules? I better not be the only one!

http://shine.yahoo.com/channel/life/a-warning-for-frequent-debit-card-swipers-531472/

 

[Cleaner44]

I think VISA protection is the same for debit or credit.

Does my Visa Debit card have security protections?
Yes, when you sign for your purchases, Visa Debit card’s security protections help prevent, detect and resolve fraud in various ways:

Visa's Zero Liability Policy*, which protects you from unauthorized charges. Any funds taken from your account due to fraudulent use will be returned to you.
Continuous fraud monitoring to detect suspicious activity on your debit card
Access to Identity Theft Assistance to help you recover your identity and prevent further problems
A 3-digit security code to verify your identity for Internet and phone purchases
What happens if someone steals my Visa Debit card and uses it fraudulently?
If your Visa Debit card is lost or stolen and fraudulent activity occurs, you are protected by Visa's Zero Liability policy.* That means 100 percent protection for you. Whether purchases occur online or off, you pay nothing for fraudulent activity.

If you notice fraudulent activity on your Visa Debit card, promptly contact your financial institution to report it. It is important to continually monitor your monthly statement to identify any unauthorized transactions.

How can I make sure I receive Visa's extra security protections?
Just sign the receipt when you use your Visa Debit card. When you swipe your card, select CREDIT on the keypad and sign the receipt. Or tell the cashier you want to sign for your purchase. You also receive added security protection for online, phone and mail orders, and for transactions under $25 that don’t require your signature.

What else can I do to protect myself from fraud losses?
If your card is lost or stolen, contact your financial institution immediately. This reduces your liability if fraud losses have occurred.

http://usa.visa.com/personal/cards/debit/visa_check_cards_faq.html#anchor_19

VISA and the banks prefer that we use credit because usually they get a bigger % of the transaction as a fee.

 

[angelatc]

I think VISA protection is the same for debit or credit.



VISA and the banks prefer that we use credit because usually they get a bigger % of the transaction as a fee.

VISA says that, but getting them to honor it takes a lot of diligence. And while my experience may not be typical, the banks that issue the debit card won't tell you about the protections.

I worked for a non-profit. We ordered some merchandise using the debit card. The seller didn't ship. The bank (TCF) denied that my purchase was covered, as did VISA during my initial conversation.

Because I prefer not to waste time, I called the President of VISA International, and had his secretary look at the policy on the web, then she transferred me to a VP and my problem began to end there.

But even the bank didn't know the policy. (Of course, they're about bone stupid anyway.)

 

[angelatc]

I think VISA protection is the same for debit or credit.



VISA and the banks prefer that we use credit because usually they get a bigger % of the transaction as a fee.

"The banks prefer customers to process transactions as a credit because it costs them less to process the transaction" is a more accurate way of saying that.

Visa gets the fee - they don't pay it.

 

[Thrashertm]

I think it's always better to use a credit card if you have the self-control and responsibility to fully pay off your balance every month. Then you can get airline miles and points, and build up your credit history.

 

[acptulsa]

VISA says that, but getting them to honor it takes a lot of diligence. And while my experience may not be typical, the banks that issue the debit card won't tell you about the protections.

Correct, as usual. Remember, possession is nine-tenths of the law. When you use a credit card, you haven't paid yet. When you use a debit card, you have--on the spot.

Doesn't sound like that much of a difference, but if you don't believe me ask a lawyer.

 

[ryanduff]

But what about using a debit card as credit? Most banks offer a Visa "debit card" and the OP is a bit misleading with this.

Debit is handled instantly, like paying with cash at a merchant. You put in your pin and the merchant pays no fees. This option usually costs the bank more money.

Credit processes through Visa and even though it still processes through your bank, gives you the benefits of protection, etc. This option costs the merchant more than the bank since the merchant is responsible for the transaction fees.

Since you can use most debit cards as credit and sign instead of using your pin, why not? You get the protection, opposed to using your pin which defaults in you being liable. Heck, my bank even gives me $0.05 for each credit transaction. I end up using credit everywhere I swipe my debit card and only use my pin when getting money at an ATM machine.

If you have a credit option with your debit card, and have the cash available, use it over debit rather than using a traditional credit card where you might incur interest. Unless, of course you pay off your monthly balance. We're all doing that right?

Just thought I'd help clear things up.

 

[youngbuck]

It's better do use a credit card when there is not money in your checking account!

 

[Romulus]

cash is freedom




when its worth something that is

 

[MsDoodahs]

I think it's always better to use a credit card if you have the self-control and responsibility to fully pay off your balance every month. Then you can get airline miles and points, and build up your credit history.

Rewards programs aren't limited to airline miles, either.

Cash back offers and retirement account money, those kinds of things are attractive as well.