Should I Use Credit or Debit Cards When Paying for Online Purchases?
Online shopping allows you to beat the crowds, compare prices at different stores without actually visiting the store, and send gifts to family and friends without heading out to the post office or local UPS store. Still, the question becomes which should you use when paying or online purchases – a credit card or a debit card?
Which is Safer to Use Online, Credit or Debit?
This is a dilemma that many shoppers online face, especially if they worry about having their identity stolen. And the truth of the matter is that if someone does steal your account numbers and use your card online without your permission, you are more likely to get your money back if you use your credit card.
Why Use Credit Cards Online? y
Yes, credit cards offer a thicker layer of protection for you against the effects of having your identity stolen. But why is this? Consumers are protected by law from unauthorized use of their credit cards. This law, which is called the Truth in Lending Act, sets the maximum liability for consumers for unauthorized credit card use at only fifty dollars. For online purchases, the law sets the maximum liability for unauthorized transactions at zero. As long as you report the transaction in a timely manner, you should not have any problems at all.
Identity Theft and Debit Cards
The law that protects consumers against unauthorized charges and identity theft is a bit more lax than the Truth in Lending Act. There are deadlines that must be met for reporting unauthorized use of your debit card, and if you go past that deadline when reporting a transaction that you didn’t authorize, then you may never get your money back at all.
How the Law Differs for Credit versus Debit Cards
If someone steals your credit card, under federal law, you are only responsible for the first fifty dollars in charges. If you notify the credit card issuer before any charges have been made, you may not have to pay a dime. If the purchase occurs online or in a way where the card does not have to be physically present with the fraudster in order for them to use it, you have no liability whatsoever. You can add a second protective layer from liability by choosing a credit card with a zero liability feature. Some Visa and MasterCard credit cards offer this type of benefit that makes reduces your liability to zero on any unauthorized charge.
Similar rules exist for debit card use by unauthorized persons, but the restrictions are greater. For instance, federal law limits your liability for unauthorized use of your debit card to fifty dollars, but only if you notify the issuer of the debit card within two business days of discovering that the card was lost or that it had been stolen. Put off your obligation for a few days longer and your liability can reach $500. If more than sixty calendar days has passed since the time your bank statement was mailed to you, and the issuing bank may not protect you at all. Under federal law, if a thief steals just your debit card number (and not the card itself) you will have sixty days upon receiving your bank statement to report transactions that you did not authorize. It is notable that if the fraudster steals both your card and your pin number, that the federal regulations are your only recourse, since the Visa/MasterCard zero liability applies just to non-pin transactions with your card.
Other Considerations
There is another compelling reason to get out your credit card instead of your debit card to pay when you are shopping online. If you receive an item that is broken, or that stops working after just a week or two, you can contest the charge on your credit card, regardless of what the merchant’s policies might happen to be.
Updated: January, 14 2012