Debit versus Credit: Which Card is Safer?

Debit card and credit card for online shoppingThe old saying, cash is king, rings true in far fewer scenarios than in decades past. Now, consumers are all but programmed to swipe away for everything they buy, from major purchases to a routine morning latte. While credit and debit cards are more often used because of their speed and simplicity, each type of card serves a different purpose for consumers. Debit cards take money directly from a bank account to pay for a transaction almost immediately; credit cards, on the other hand, put the transfer of money on hold for a period of time, giving buyers more purchasing power in some cases. But there are other differences in how credit and debit cards benefit spenders, especially when it comes to their security features. Here’s what you need to know about the safety of debit versus credit cards.

Managing Your Spending

The biggest difference between the security of debit and credit cards is the management of cash flow each month. When a debit card is used for everything from small buys to big expenses, it can be beneficial in keeping your spending in check. Debit cards only allow you to use what is available in your checking account and, in some cases, a small overdraft buffer. Credit cards allow spending up to the credit limit. If that limit is high and there is little control over your buying habits, you have the potential to rack up debt that can be costly to repay. In the sense of money management, credit cards offer less security than debit cards.

What’s Protected Under the Law

Under the Fair Credit Billing Act, credit cards are far more protected than debit cards. The law provides methods for credit card users to dispute fraudulent charges as well as charges that were made in error by a specific merchant. In some cases, credit cards give cardholders the ability to withhold payment if the product purchased is defective – a security feature not offered to debit cardholders.

Debit cards do have some protection under the Electronic Fund Transfer Act, but only unauthorized charges on a debit card are covered. When a charge is disputed, credit cardholders have 60 days from the date of the billing statement and no time limit when a card was involved in a security breach. During this time, the limit for liability is $50. Debit cardholders only have two business days to dispute a charge with the same $50 liability exposure; after that short time, liability jumps to $500 for the next 60 days.

Delayed Impact

Credit cards offer more security to cardholders than debit cards when it comes to fraudulent charges because the impact on your financial situation is delayed. Credit cards are a method of borrowing money, and when an unauthorized charge hits, it does not result in an immediate consequence to your checking or savings account. With debit card charges that are unauthorized, the money is already out of your account. Both debit and credit card fraud has the potential to take some time to resolve, but only issues with debit cards have an immediate negative impact on your finances.

Benefits on Purchases

In addition to the peace of mind credit cards can bring in terms of delayed impact and legal protections, credit cardholders also have several safeguards in place for purchases. For instance, some credit card issuers offer purchase protection which reimburses you for the cost of an item if it is damaged or stolen, up to certain limits. Similarly, many credit card companies offer extended warranties on certain products that add up to two years of coverage past the manufacturer’s warranty. There is also return protection that allows for extended returns with some merchants. While each credit card issuer has variations of these purchase safeguards, no debit card makes these added benefits available to cardholders.

Debit cards are a great way to manage cash flow month to month, without the fear of overdoing it on spending. However, credit cards provide consumers with far more protections not only under the law, but with fraud, unauthorized or incorrect charges, and purchases.

Posted on October 6, 2017 by in Credit Cards

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