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Today debit cards are a popular choice for purchases. However when it comes to the bigger ticket transactions, it’s recommended to use your credit card instead.
This is because all credit cards purchases in the United States are protected by a law known as the Fair Credit Billing Act. Under this law you can only be held accountable for a maximum of $50 for credit card fraud, which includes damaged merchandise or goods that were never delivered. However nearly all creditors don’t bother with the $50 and instead give you zero liability for fraud.
With debit cards, don’t let the words “Mastercard” or “Visa” on them fool you. The protection you have the same benefits as you do with a credit card transaction. Although Visa and Mastercard claim zero liability for fraudulent transactions with their debit cards also, keep in mind this is a policy and not a law. Therefore it can be enforced (or not) at their discretion. Also when you enter a PIN number instead of signing for a debit transaction, it may be processed over non-Mastercard or non-Visa networks. These offer them a potential “off the hook” pass for their zero liability policy. Be sure to sign for the purchase instead of using a PIN number as this ensures it’s a transaction that goes through the Visa or Mastercard network.
Both debit card issuers have exceptions when it comes to negligence. For example if you threw your debit card in the trash intact and a crook got a hold of it… if Visa could prove this, you most likely will not be protected. At the end of the day it’s usually the financial institutions that issue your debit cards who decide who incurs the fraud liability.
Under federal law the benefit you have with debit card transactions is the right to dispute a charge. However if you wait more than 2 days to report the error, your $50 liability increases to $500. So unless you are keeping tabs on your banking account transactions on a daily basis, this could prove to be a problem. If for some reason you don’t notice and report the fraud within 60 days, you lose all protection and will be held entirely liable for any and all fraudulent transactions. If your debit card is a Visa or Mastercard, these time limits don’t apply since their policies claim they will cover it. But still it’s important to remember those are just their policies, not laws.
The benefit of credit card fraud protection is you are protected by federal laws as well as more stringent policies by the issuers. You can simply call up your credit card company and they will reverse the charge while the transaction is under investigation — meaning you won’t have to wait until after to get your money back. The fraud reporting process is usually easier too, especially with premium credit cards such as American Express.
It’s even risky using debit cards for small purchases. Not because those amounts will make a dent in your finances, but each purchase is an opportunity for a scam artist to swindle your account numbers… to make much bigger purchases. This is why I recommend using your credit cards in place of debit. Just pay your balance off in full every month and you will pay no interest, earn rewards, and have greater protection against fraud.