When Credit Is Safer Than Debit

Because US law protects you much better when you’re using borrowed money instead of cash, some situations might call for a credit card and some a debit.

• Select “credit” over “debit” when using your card at checkout. Besides the whole stealing your PIN thing, it’s an “authorization hold” vs. instant money snag.
• Don’t make important purchases by debit.
• Don’t use debit for monthly recurring charges.

Overall, debit is much harder to dispute than a credit cards. Credit cards have specific laws regulating their use. With a debit card, you’re subject to the byzantine array of merchant agreements and the contract you have with your bank.

We personally like debit *because* it takes the money out quickly. Expenses can be easily monitored and their repercussions are immediate, helps thwart the slow slide into a spending spree that easy credit can encourage. (Hat tip to Larry.)

Comments

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  1. bambino says:

    Y’know, my mother keeps telling me the same thing. Don’t use debit in a restaurant. Don’t use debit on ebay. Yet I keep doing it for fear of the carefree spending that credit can bring. I guess I won’t learn until my checking is drained dry by some unscrupulous lackey.

  2. Jimmy M says:

    bambino: using debit on eBay (presumably via PayPal) is a VERY bad idea. PayPal’s fraud protection is dismal, at best. They give you a bunch of BS when you try to switch payment to a CC but the thing is – when you use a CC you’re protected by those laws. When you used debit or direct withdraw, you’re not.

    I use a CC for all things online.

  3. latrevo says:

    Don’t most “Debit” cards work as regular credit cards? I use my Visa
    check/debit card for pretty much everything. Straight out of the
    checking account, yet as safe as a credit card. Just my $.02

  4. GenXCub says:

    didn’t the latest security leak involving debit cards and PINs involve Wal-Mart?

  5. Jimmy M says:

    latrevo: precisely what this points out. It’s got the VISA logo so it’ll work at VISA places, but the protection that govens it is determined by the bank, NOT the laws the federal govt. has in place for credit card transactions.

  6. Tommi says:

    Oh no, why are you guys publishing this? Some whacked out repub is gonna write a bill now making it even tougher to buy something. -tgs-

  7. bambino says:

    And Tommi shows his infantile grasp of politics. Anyway thanks Jimmy M, I should’ve said that I do use CC for paypal, just not all other online transactions. Your reply to latrevo is a good note as well.

  8. Nifle says:

    Yes, you may be able to overspend if you use credit with your checkcard but you should know about how much money you have in your account. Also, Visa is making a strong intiative to use real time data off of your checking account to know your available balance. They have worked incredibly hard with banks to make sure that you don’t go over your limit…which should be your available account balance. Usually, if you do go over your balance it’s due to a store submitting erroneous freezes (either over or above the purchase amount).

    I love using the credit feature on my checkcard because my financial institution gives me an airline mile for every dollar I spend. A lot of banks are now offering this service for free or a small yearly fee. It’s a great incentive and gives me the standard visa coverage on my purchases.

  9. latrevo says:

    Jimmy M: Wow, the things I have to learn. So, since I’m a little slow,
    you’re telling me that if I use a check card as a credit transaction,
    that I’m no safer (besides no risk of someone stealing my PIN) than
    when it’s a debit transaction?

  10. gte910h says:

    “Credit” used with your debit card and a VISA logo is *not* protected
    by the consumer protection laws that credit is. It just uses some of
    the same systems to enter the purchase into the banking system.

    You need a real credit card to be protected.

    If you’re concerned about overspending, ask the CC company to lower you
    credit limit on the card and pay it off at every paycheck (or every
    night at home if the cc company allows it). You’d be amazed how hard it
    is to overspend with a card with a 500 limit.

    –Michael

  11. Jimmy M says:

    ^– What he said.

  12. Jimmy M says:

    I love using the credit feature on my checkcard because my financial institution gives me an airline mile for every dollar I spend. A lot of banks are now offering this service for free or a small yearly fee. It’s a great incentive and gives me the standard visa coverage on my purchases.nifle

    Unless your banks policies match the federal laws, you are incorrect. The laws only protect actual credit cards.

  13. Smoking Pope says:

    Why is the guy in this photo charging “Fork Tongs”? Doesn’t he know you can put those on layaway?

  14. Morton Fox says:

    So when is it appropriate to use a debit card? I don’t use plastic at stores anyway because only paper money will work in Where’s George.

  15. This is a fantastic post, and as the comments show, there is still a lot of confusion and questions to be answered. I request a more in-depth post on this topic.

    Incidentally, and in case there won’t be a more thorough post, what’s the reason behind not using a debit card for monthly recurring charges (as opposed to occasional monthly charges)?

  16. Rick Dobbs says:

    Another important thing to remember is that a lot of times, there are charges for using your card as a debit vs. credit card, where the merchant pays the tranaction fee. Watch the little pin pads for that .25 or .50 charge, or ask first.

  17. greggo says:

    the check cards are what I find the scariest – if someone finds(steals) your check card, the only protection you have is when the cashier checks the his signature against the back of the card, and we all know how often that happens.