The downside of debit cards

July 4, 2008

I don't like having credit card balances so I tend to use my debit card instead. But my daughter, who works at a bank, says credit cards offer more protection. Is she right?

I don't like having credit card balances so I tend to use my debit card instead. But my daughter, who works at a bank, says credit cards offer more protection. Is she right?

Yes. A credit card gives you the opportunity to stop payment if you buy a defective product or need to dispute an erroneous charge, since the vendor isn't paid immediately. With a debit card you don't have those options, since the cash is deducted from your account almost instantly. Also, if someone steals your debit card and knows your personal identification number, he or she can withdraw funds directly from your bank account, which could cause other payments to bounce. And, while credit cards are covered by a federal fair credit law that generally limits your potential losses to $50, debit cards are covered by less consumer-friendly electronic fund withdrawal laws. The longer it takes you to report an unauthorized debit card transaction, the more of your cash you can lose.