When should I charge something as debit or as credit? And how important is it to make that distinction?

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Posted by Molly C (MONEY FORUMS: 5, Answers: 0)
Asked on November 2, 2015 8:19 am
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Hi Molly, Beth provided some great information - I just want to expand a little on the difference between using a credit card vs a debit card with regard to liability. Credit cards offer more legal protections than debit cards are required to. Some banks extend these protections to their debit cards, but not all banks do. If you lose your credit card you are only liable for a maximum of $50.00 for purchases made before you report it lost. The Electronic Funds Transfer Act provides this same protection for lost debit cards -but only if the card is reported lost within 48hrs. After that your risk goes up to $500; if you do not report it for 60 days then there is no limit to your risk. Sometimes people don't realize the card is missing right away so this is a significant benefit to using a credit card instead of debit. Credit card companies are required to remove fraudulent or disputed transactions from your account right away; while you have similar protections for a debit card under the Fair Credit Reporting Act, banks do not have to put the money back into your account until the dispute is resolved! Finally, many credit cards cover the collision damage waiver (CDW) when you rent a car. Renting a car with a debit card may require a deposit in the form of a hold on your account. Some banks will treat your debit card like a credit card for lost cards or bad faith transactions, but they are not required to do so! It is very important therefore to know if your bank does, and if you don't know assume that they do not! Personally I use a credit card that I pay monthly in place of using a debit card. And I keep my debit card transactions to a minimum and I NEVER use my debit card online where the potential for fraud is higher. Hope this helps!
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Posted by Peter Neeves (MONEY FORUMS: 1, Answers: 59)
Answered: November 2, 2015 9:06 pm
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Molly, I assume you are asking how to answer the question "debit or credit?" when you use your debit card to make purchases. In either case, the card is still a debit card -- the funds will come out of your account that day. However, when you say "credit," the transaction goes through a different network (VISA or MC -- whichever logo is on your card.) Legally, this transaction just a bit safer. When you say "credit" it requires a signature, which makes the transaction the legal equivalent to an electronic check.
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Posted by Beth Tallman (MONEY FORUMS: 1, Answers: 61)
Answered: November 2, 2015 10:15 am