OK, so hopefully you all are using the envelope system by now and making as many purchases as possible in cash. Because, as I discussed at length, there are various benefits to using real paper money whenever you spend, including the fact that it is more painful to spend money this way and you are likely to spend less because of it.
But, like you, I live in the real world, and I know we all have to use our debit cards from time to time. So today, I wanted to address concerns about fraud protection when using debit cards, since there seems to be some confusion about what kind of protection is offered to people using debit cards vs. using credit cards. According to a representative from Visa’s debit card division, many of the same features and protections provided by credit cards are also offered by with debit cards. In the case of Visa, the fraud protections carried by debit cards and credit cards are identical. All Visa cards are protected by a zero liability policy which states that you don’t ever have to pay for unauthorized purchases. This remains true whether the unauthorized purchase was made on a credit card or a debit card. However, (because there always has to be a however) this only works when you *choose to sign for your transactions.* There are some financial institutions out there who will offer fraud protection for people using debit cards with a PIN as well, but to be sure you are covered, you should always choose to sign for your purchases.
What does this mean in terms of answering the question, “Credit or debit?” Well, it means that you should choose “credit,” with your debit card, even though it is not actually credit. I don’t know why they do it this way, since both will take cash out of your account no matter which way you choose to do it. But if you want to be covered by the credit card company that backs your debit card, always sign just to be safe.
The bottom line with fraud protection on both credit and debit cards is that it is mainly just a hassle for you to deal with. You will not have to pay the charges, but you might have to argue with some customer service representatives in order to avoid paying the unauthorized charges. This is yet another reason to not use these stupid cards whenever possible, and to keep a close eye on your accounts at regular intervals. As far as replacing the money in your account, this is usually handled within 5 days of the report of the loss, and sometimes sooner, so you want to be able to get on that process as quicly as possible.
When I use my debit card, I choose “credit card” when prompted and then sign my name. The only experience I have ever had with fraud actually came from using an ATM, not a debit card! But if you want to be extra safe, you can also make a policy of using debit cards that are not associated with your primary checking account. If you have a separate account with funds reserved just for credit card purchases, then you don’t have to worry about somebody getting access to the bulk of your money.
To clarify the specifics of debit card fraud protection, be sure to ask your own bank about the details of their liability protection and security procedures.
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That sucks, because I buy EVERYTHING online, and therefore never sign for anything. If something happens, I’m probably screwed.
@Kerry, most of those online purchases are considered credit purchases, I believe. You should check with your bank, but I’m pretty sure the fraud protection extends to those purchases for most cards.
I did not know that about debit vs. credit purchases. I will check with my bank for sure (and we are definitely using our cashy money for all food & miscellaneous purchases – all bills are direct debit from the account) to find their policies, and definitely start signing for all purchases.
Thanks! (And I think you’re definitely one of the most useful blogs on the Isle of Odors.)
@Amy, thanks! I certainly stink with the best of them.