Is A Credit Card Safer Than A Check Card?
| May 26, 2009 | Posted by Roshawn Watson under Uncategorized |
By: Roshawn Watson
“if the disseminators of personal finance wisdom have this issue wrong, could some of my readers also believe the same debt myths?”
I hope not to offend you with the last question. I have the utmost respect for you; after all, you’re clearly reading a personal finance site to improve your financial literacy or to interact with other like-minded individuals. Nonetheless, debt myths have been so ingrained into our society that people cling to them religiously and will attack anyone who challenges their paradigm.
Let me be clear. I am debt free (excluding the house) and NEVER intend to carry consumer debt again. To date, getting out of debt was one of the most painful experiences I have undergone. I simply don’t care enough about what other people think of me to go into debt to prove I am doing well. Instead, I will simply do well.
My “controversial” statement and the obnoxious reply
Now, I made a comment on the forum stating since I primarily use my check card as a credit card,
according to (the) Visa-Mastercard websites, I am afforded the exact same legal protection as anyone using their credit cards. Thus, it is my understanding that it is no safer to use a credit card over a debt card.
Now of course, the Visa or Mastercard’s legal protection on their check cards is simply a verifiable fact, yet instead of going to their website BEFORE trying to discredit me, one zealous credit card enthusiast decided to attack first. Here is his or her rant…
Check your facts… There is no federal law that protects debit cards from fraudulent activity (though at least one state–MA–has state law mandating it). For everyone else, it is up to the bank to create its own policies, and it’s strictly voluntary. Contrast that to credit cards, which have strict federal laws regarding liability with fraud…
There is a federal law regarding consumer liability with ATM cards, but depending on your bank they may not apply it to debit cards. And either way, the law protecting credit card is better.
i) $50 if you notify the bank within 2 days of finding out your card is lost or stolen;ii) up to $500 if you notify your bank after 2 days of learning of the loss or theft;
iii) potentially, unlimited liability for all unauthorized transactions that occur after 60 days from when you receive your statement containing the unauthorized transactions if you fail to notify your bank within 60 days of receiving your bank statement.
Notice that I never said that there was a federal law that gave the same protection. I have been aware of legislation he quoted for years, and yet I said according to Visa-Mastercard’s website, I am afforded the exact same legal protection as anyone using their credit cards. Well because I value the truth more than peace I responded as such.
Look, I know my facts fine. Here is a statement straight from VISA site…
Q: Does my Visa Debit card have security protections?
A: Yes, when you sign for your purchases, Visa Debit card’s security protections help prevent, detect and resolve fraud in various ways:Visa’s Zero Liability Policy, which protects you from unauthorized charges. Any funds taken from your account due to fraudulent use will be returned to you.
Did you get that? When you use the check card as a credit card (sign for purchases), you have ZERO LIABILITY. This is the condition that Visa mandates from banks issuing check cards with their logo…period.
If you want to read more, check it out for yourself
Convenience and Protection are NOT the same thing
Now, another forum member (this one I personally like a lot and sometimes read his site) commented on my response stating…
This is very different than what happens with a credit card. If there is a fraudulent charge on my credit card, I am never out a penny, even for a moment. There is nothing that needs to be returned.
If, however, there is fraudulent activity on a debit card, that money is gone from your account until they investigate and eventually refund it to you. In the meantime, you don’t have those funds, which could cause other payments to bounce and result in a slew of late charges and other issues that you need to spend time cleaning up once you get the money back.
Now, this is a good point albeit a different point from the one that I was making. He is speaking about the convenience of using a credit card compared to a check card and I was speaking of the protection of using a check card compared to credit card. These are two very different things indeed. Although I care immensely about protection, some conveniences I can do without. Here is my response.
I never said that fraudulent charges were never taken out of your account. Just as if your credit card account was fraudulently charged, your account will initially reflect the (fraud). If you have check card fraud, your bank account would be drafted. However, my point is that you are afforded the same protection: zero liability for fraudulent charges once you inform them. For me that’s enough.
Additionally, this is why I also carry ID theft insurance (they will spend the time cleaning up the bad charges) and overdraft protection (no late fees). The money will be returned and fees reversed in the event of theft.Additionally, according to a report by Dunn and Bradstreet, people generally spend 12-18% more on purchases when they used credit vs. using cash/check card. There is a phenomenon called the “
pain of paying cash.” Thus, one generally spends less if it comes directly out of their account. This is why I choose to use my check card.
It’s a preference mostly. I definitely choose the inconvenience of having my ID theft protection service clean up the mess (if fraudulent charges are made) than paying a credit card bill each month, especially if that means that statistically I’m likely to spend (12-18%) more.
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Pain Of Paying Cash
Thanks for clearing this up. I have been wondering whether I was at increased risk by only using my debit card.
Love this post! Well presented. Stick to your guns, Shawn. I love that you don't shy away from a discussion and the facts.
Thanks for the support. It's well appreciated. Apparently, there's lots of confusion about this topic.
I think your critic had a legitimate point: in all likelihood the fine print of your Visa agreement allows them to change their terms in the future; Visa cannot change the laws protecting credit cards. Also, if it came down to a dispute between me and Visa, I would much prefer to be in the position of being able to point out that Visa was violating a federal law, than relying on saying that they were violating a promise they made at some time on their web site.
Topher,That's an interesting point, but they would have to provide disclosure of the change. Another thing is that changing the policy to limit protection would not benefit VISA or Mastercard (only the banks which furnish their cards). In fact, the whole point of this policy is to give their check cardholders the same peace of mind afforded to the credit card users. CC companies still make money off of their fees, so they still win.Thus, presently the protection is the same even though functionally the protection is coming from a different entity (VISA not the federal government). Given these points, I am comfortable using the check card but can definitely concede that some may just feel more secure with the credit cards. Unfortunately, this security comes at a 12-18% premium.
Great subject! I agree with the last statement of "pain of paying cash." It really makes you think BEFORE you spend. With credit cards raising their interest rates even though you pay on time, etc. using a credit card is not a great option. The days of paying it off later because the interest is so low are gone. Using your check card as a credit card is a great tactic to force you to spend wisely. AND using the check card is safe so there you go.
I like cash. Not buy more than is
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For me, it's still the best to use the check card rather than credit card. but anyway both of them are not safe and they can still be stolen.
thanks,