Credit Card Deals: are They Better Than Debit?

Everyone knows that a credit card is a very useful tool in money management. But it is also a great responsibility. Immature credit card users quickly get into debt. They fail to pay off their balances and end up declaring bankruptcy. That is why a lot of people believe that credit cards cause more trouble than they are worth and it is better to use debit.

There are several obvious advantages of debit cards. You can not spend more money than you have and thus get into debt. You do not have to pay extra fees and APRs.

However, those who advocate debit card usage forget about one very important issue – security. There is no need to argue over how urgent this problem is with credit/debit card fraud being in top 7 among Internet crime categories reported by Internet Crime Complaint Center. Even if you do not perform any cashless transactions online your card information can still be stolen anywhere you use your plastic for payment – at a restaurant or a gas station.

And even if your personal information is not stolen you can simply be overcharged for your own purchases. And the question always is – how liable am I for these transactions?

The answer to this question depends on the type of plastic you use.

All debit card transactions are regulated by Electronic Funds Transfer Act. According to this act you need to report the unauthorized transaction to your bank during two business days and your liability will be limited to $50. You are given 2 months to report the fraud to your bank if you do not want to pay more than $500. After two months you are fully liable no matter how outrageous the transactions are.

Some banks offer what they call ‘limited liability’ policy for their clients. But even if you think you qualify for reimbursement the bank has the right to decide whether you have exercised reasonable care in protecting your plastic. In other words, the bank might state that the fraud is your own fault and you should be held liable for all the transactions.

Credit cards are quite a different story. According to the Fair Credit Reporting Act the bank can not hold you responsible for the unauthorized charges. If you check the terms and conditions of your credit card you can see the Zero Liability sign.

If you have become a credit fraud victim you need to remember that your liability is limited to $50 regardless of the amount of money transferred from your credit account. All you need to do is dispute the charge that is unauthorized. Of course, it’s not a quick and easy process and you will have to prove that you have not authorized the transaction. But it is still better than being charged for something you have never purchased.

So if your are still deciding whether you need to apply for a credit car deal or keep using your debit account think about how much trouble you can avoid with a credit card.