Yahoo recently featured an article about the hazards of using your Debit Card instead of a Credit Card. Below is a copy of the content from the list with my comments following each point in blue.
It should be noted that this article was written by Dana Dratch and provided by CreditCard.com. (Hmmmmmmmmm) 🙂
“You don’t use a debit card online,” says Susan Tiffany, director of consumer periodicals for the Credit Union National Association. Since the debit card links directly to a checking account, “you have potential vulnerability there,” she says. *False: The same vulnerability exists on any electronic payment, even a credit card.
Her reasoning: If you have problems with a purchase or the card number gets hijacked, a debit card is “vulnerable because it happens to be linked to an account,” says Linda Foley, founder of the Identity Theft Resource Center. She also includes phone orders in this category. *Again, same problem as a credit card.
The Federal Reserve’s Regulation E (commonly dubbed Reg E), covers debit card transfers. It sets a consumer’s liability for fraudulent purchases at $50, provided they notify the bank within two days of discovering that their card or card number has been stolen. *True, but see next paragraph.
Most banks have additional voluntary policies that set their own customers’ liability with debit cards at $0, says Nessa Feddis, vice president and senior counsel for the American Bankers Association. *True in most cases, especially these days, so this is one thing you want to verify when opening an account with a debit card.
But the protections don’t relieve consumers of hassle: The prospect of trying to get money put back into their bank account, and the problems that a lower-than-expected balance can cause in terms of fees and refused checks or payments, make some online shoppers reach first for credit cards. *True, but Identity Theft Protection, not ID Insurance from the bank or many other companies, assign someone to work your case for you. This saves you a LOT of work and hassle. I use Zander Insurance’s ID Theft Protection for my family.
2. Big-Ticket Items
With a big ticket item, a credit card is safer, says Chi Chi Wu, staff attorney with the National Consumer Law Center. A credit card offers dispute rights if something goes wrong with the merchandise or the purchase, she says. *True, but your Visa logo Debit Card has the exact same protections per policies stated on Visa’s own website.
“With a debit card, you have fewer protections,” she says. *True, but only when you use the Debit feature (use the 4-digit pin) with your Debit Card.
In addition, some cards will also offer extended warranties. And in some situations, such as buying electronics or renting a car, some credit cards also offer additional property insurance to cover the item. *Note: Most extended warrantees are not worth what you pay for them. A free extended warrantee is a nice feature, but I expect the company to stand by their product and can deal with them if there is a problem. Ask my wife about her hot curling irons.
Two caveats, says Wu. Don’t carry a balance. Otherwise, you also risk paying some high-ticket interest. And “avoid store cards with deferred interest,” Wu advises. *True
3. Deposit Required
When Peter Garuccio recently rented some home improvement equipment at a big-box store, it required a sizable deposit. “This is where you want to use a credit card instead of a debit,” says Garuccio, spokesman for the national trade group American Bankers Association.
That way, the store has its security deposit, and you still have access to all of the money in your bank account. With any luck, you’ll never actually have to part with a dollar. *True, but you have the money because you are in the position to PAY for your purchase. Why should you allow Visa pick up your slack?
“To me, it’s dangerous,” says Gary Foreman, editor of the frugality minded Web site The Dollar Stretcher. “You have so many people around.” *This is an opinion, but no disagreement here.
Foreman bases his conclusions on what he hears from readers. “Anecdotally, the cases that I’m hearing of credit or debit information being stolen, as often as not, it’s in a restaurant,” he says.
The danger: Restaurants are one of the few places where you have to let cards leave your sight when you use them. But others think that avoiding such situations is not workable.
The “conventional advice of ‘don’t let the card out of your sight’ — that’s just not practical,” says Tiffany. *Opinion, but no disagreement here. So go green and pay with cash. They take that at any restaurant.
The other problem with using a debit card at restaurants: Some establishments will approve the card for more than your purchase amount because, presumably, you intend to leave a tip. So the amount of money frozen for the transaction could be quite a bit more than the amount of your tab. And it could be a few days before you get the cash back in your account. *True, but you will always want to have a little extra money earmarked for emergencies anyway. You probably don’t pull up to the pump with the gas gauge BELOW the “E”, same with money.
5. You’re a New Customer
Online or in the real world, if you’re a first-time customer in a store, skip the debit card the first couple of times you buy, says Breyault.
That way, you get a feel for how the business is run, how you’re treated and the quality of the merchandise before you hand over a card that links to your checking account. *Not really sure how this effects the process in any way. Pay cash or use the protection of your Visa logo Debit card.
6. Buy Now, Take Delivery Later
Buying now but taking delivery days or weeks from now? A credit card offers dispute rights that a debit card typically does not. *False, same as credit card according to Visa.
“It may be an outfit you’re familiar with and trust, but something might go wrong,” says Breyault, “and you need protection.”
But be aware that some cards will limit the protection to a specific time period, says Feddis. So settle any problems as soon as possible. *True in some cases, but check with your Debit card issuer to be certain. Again, not sure this statement holds water.
7. Recurring Payments
We’ve all heard the urban legend about the gym that won’t stop billing an ex-member’s credit card. Now imagine the charges aren’t going onto your card, but instead coming right out of your bank account.
Another reason not to use the debit card for recurring charges: your own memory and math skills. Forget to deduct that automatic bill payment from your checkbook one month, and you could either face fees or embarrassment (depending on whether you’ve opted to allow overdrafting or not). So if you don’t keep a cash buffer in your account, “to protect yourself from over-limit fees, you may want to think about using a credit card” for recurring payments, says Breyault. *True, so just make a different arrangement or don’t do business with them. Those who don’t pay attention to their money will wonder where it went. Neglect getting your oil changed and you will have an expensive repair, don’t eat or sleep and you will break down. Handling your money is the same way, just pay attention and the above statement should not be a problem.
8. Future Travel
Book your travel with a check card, and “they debit it immediately,” says Foley. So if you’re buying travel that you won’t use for six months or making a reservation for a few weeks from now, you’ll be out the money immediately.
Another factor that bothers Foley: Hotels aren’t immune to hackers and data breaches, and several name-brand establishments have suffered the problem recently. Do you want your debit card information “to sit in a system for four months, waiting for you to arrive?” she asks. “I would not.” *True, but you shouldn’t buy something you don’t have the money for. Save up and pay for trips, and paying for portions along the way is an awesome way to handle those expenses. We are doing that with our upcoming summer vacation – cabin rental, horse-riding reservations, etc… The best trips are those that don’t follow you home.
9. Gas Stations and Hotels
This one depends on the individual business. Some gas stations and hotels will place holds to cover customers who may leave without settling the entire bill. That means that even though you only bought $10 in gas, you could have a temporary bank hold for $50 to $100, says Tiffany.
Ditto hotels, where there are sometimes holds or deposits in the hundreds to make sure you don’t run up a long distance bill, empty the mini bar or trash the room. The practice is almost unnoticeable if you’re using credit, but can be problematic if you’re using a debit card and have just enough in the account to cover what you need.
At hotels, ask about deposits and holds before you present your card, says Feddis. At the pump, select the pin-number option, she says, which should debit only the amount you’ve actually spent. *True, do find reputable establishments and forge ongoing relationships with them. My wife only purchases gas from one station 99% of the time. When we have a problem, we deal with them – not Bank of America.
10. Checkouts or ATMs That Look ‘Off’
Criminals are getting better with skimmers and planting them in places you’d never suspect — like ATM machines on bank property, says Foley.
So take a good look at the machine or card reader the next time you use an ATM or self-check lane, she advises. Does the machine fit together well or does something look off, different or like it doesn’t quite belong? Says Foley, “Make sure it doesn’t look like it’s been tampered with.” True, so be aware of your surroundings and who you are dealing with (which would apply to use of your Credit Card at ATMs too).
There are a lot of things wrong with CreditCard.com’s article. Could it be because they are pro-credit cards?
For over 3 years I have been using Debit cards, cash, checks, and on-line bill pay only – no credit cards. There are no surprises when I open my mail, no interest or late charges paid to banks, and it has enabled us to make educated and appropriate purchases while saving money. I got a deal on a brand new dishwasher at Sears because I was willing to walk away with my cash – but they wanted my business and gave me a discount. There are no discounts on “90-days same as cash” and finance managers aren’t willing to make a deal when all you have to offer them is cash (Debit is another word for cash). But you shouldn’t be buying things from the finance manager, you should be buying things at the register or from the salesman!
Credit and Debit Card Zero Liability policies
For more information about the Visa Zero Liability protection on both Credit and Debit cards, go to http://usa.visa.com/personal/using_visa/personal_finance/debit.html , http://usa.visa.com/personal/security/visa_security_program/zero_liability.html, or view a previous post “Is your credit card safer?”
To read the original article go to: