Debit or credit? It’s a question many of us hear on a daily basis, and it generally comes down to spending either the money in our checking accounts, or money we don’t have that we’ll have to pay back later. The benefits of using a debit card over other forms of payment are clear – it helps consumers control their spending and avoid racking up interest charges, and is safer than carrying around a wallet full of cash. However, before handing your card over at any merchant, there are some potential cons to take into account.
One issue with the use of debit cards is that they usually do not offer the same level of fraud protection as credit cards. A victim of credit card theft is often only liable for about $50 for charges incurred on a stolen card – by law, according to consumer advocacy group U.S. PIRG. On the other hand, when the fraudulent use happens with a debit card, the money is being taken directly from the victim’s account, and the liability could be from $500 to all the money in the account if the bank isn’t notified within 48 hours.
Using either a debit or credit card anywhere these days, from an ATM to a website to a trusted merchant, can be a frightening prospect as the threats of hacking and card skimming continue to grow. While both are vulnerable to information theft, the consequences for the victim will likely be less severe due to the protection offered by credit cards. It’s also easier to dispute charges or obtain refunds on merchandise ordered online or by phone that either doesn’t arrive or is damaged, since when you pay with a debit card, the merchant already has your money and may be more reluctant to give it back.
However, for those who want to continue enjoying the benefits of using a debit card, here are a few tips to reduce risk:
1. Be alert – watch out for ATM’s that look unusual, damaged or dirty; avoid using a machine if anyone who seems suspicious is lingering nearby, and make sure the keypad is covered when you type in your PIN number.
2. Watch your accounts – use the bank or credit card company websites to monitor withdrawals and charges and compare against your records of your transactions, and sign up for alerts if offered.
3. Protect your information – don’t give out your PIN number to anyone other than an immediate family member and try not to make it something that would be easily guessed. The same goes for passwords when using online banking.
It’s also important to make sure your bank and credit card companies have your current contact information so they can reach you in case of irregular activity and that you have theirs available as well, should you happen to misplace a card or have one stolen. And even when you primarily use a debit card, you may want to consider credit cards in cases where the added protection could be beneficial, such as big ticket purchases like major appliances, making hotel reservations for future travel or paying security deposits for rental of costly items.
Giving up the debit card altogether isn’t necessary, but taking steps to protect your money and minimizing your risk of becoming a victim of fraud is definitely a must.