Around this time of the season people often ask me if they should  use a credit or debit card online when shopping. I’m often asked if they are the same, and which one is safer. While both swipe the same, there are differences.  One of the biggest differences in a credit and debit card is that you won’t go into debt with a debit card because you’re using your own money that you deposited into a checking account.  When criminals fraudulently use your debit card, they’re spending money from your checking account. When charges are made to the debit card the money is immediately withdrawn. There are many advantages and disadvantages of using credit or debit cards but here I’m focused on which one you should use when shopping online during the holiday season.

Debit cards aren’t protected by federal laws like credit cards. Credit cards are protected which means they prohibited banks from charging you for fraudulent and unlawful transactions.  So essentially you can challenge and dispute inaccurate charges, as well as charges for goods bought that were not marketed as what they are, or the description of the product was not accurately described.  For example, if you order a 20 inch bike for your daughter for Christmas, but received a 12-inch bike, you can contact your bank and dispute the charge. This option would not be available if you used the debit card. If the seller doesn’t make good on the transaction you’re just out of the money. Up Up and away, the money is gone.

Places You Shouldn’t Use a Debit Card:
  • When your’ paying at the pump – gassing-up
  • Online shopping
  • For big-ticket items $$$$
  • Restaurants (Bad people work at restaurants too, never let someone walk away with your card)
  • When you set up services and purchase that are recurring
  • When you’re scheduling travel for the future
  • When making hotel reservations

 “The Federal Reserve’s Regulation E  (commonly dubbed Reg E), covers debit card transfers. It sets a consumer’s liability for fraudulent purchases at $50, provided the customer notifies the bank within two days of discovering that the card or card number has been stolen.”

So, should you use a debit or credit card. Well, with online reputable and trustworthy store, and well know stores, you’re probably okay, especially if you don’t own a credit card.  Also, if you’ve dealt with them in the past and they’ve accepted your returns then you’re okay, however, if you own a credit card the additional protections are well worth tossing the debit card and using the credit.

What if You Don’t Have a Credit Card

Although using a credit card is safer, we have to face the reality that some people don’t own a credit card, right? In this case, you can still take some steps to protect yourself; keep a low balance in the bank account to limit the loss.  Purchase services and products from reputable and trustworthy stores. Using a prepaid card is safer than using a debit card tied to your bank account. Another good step to consider is to remove the overdraft protection. This would prevent the fraudulent transition from dipping into your savings account too if the monies are not available in the checking account.