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In recent years, debit cards have become one of the most popular methods for paying for everyday purchases. However, if you are looking to buy a big ticket item, you should use your credit card instead.

How come? All purchases you make with a credit card are protected under a law called the Fair Credit Billing Act, which basically states that you have zero liability for fraudulent purchases that are made with your credit card, as well as protection against items that are of poor-quality or are damaged as well as items that are never delivered. This is the law.

With debit cards, both MasterCard and Visa also offer zero liability for any type of unauthorized transactions made over their networks. MasterCard says U.S. issuers must act in accordance with with its policy, except if they can prove carelessness on the part of the cardholder, such as disposing of their card, while intact, into a dumpster. Visa's policy has a negligence exception as well and protects cardholders that do not have a delinquent account and have not reported two more 'unauthorized events' within the last year. But, that zero liability is not a law, it is a policy -- on debit cards and therefore a matter for review by the individual card issuer.

Times have definitely gotten better for consumer debit card use. In the past, many merchants used to treat a PIN-based debit card purchase the same as they would cash or a personal check. If the item was not satisfactory, you may have gotten stuck with several hundred dollars in store credit as opposed to a refund. Currently, policies have changed in support of debit card transactions, offering greater protection and, in most cases, zero liability.

Even though debit cards have the Visa or MasterCard logo, they do not offer the same protection as credit cards. If a PIN-based transactions processes through non-Visa or MasterCard network, you may not have the zero liability protection. Your card issuer will determine whether you are liable or not in the event of fraud occurring non-network. On the contrary, when you sign for your purchase, you are ensuring that the transaction is being processed over the Visa or MasterCard network and falls under the protection of the zero liability umbrella.

Credit-card cushion
When you use a credit card, you have the choice of stopping payment in the event that you are not happy with the quality of your purchase. The same holds true for purchases made with personal checks. All you have to do is contact your bank and request for them to stop-payment before the check clears.

However, there are a few stipulations. The sales has to be greater than $50 and must have taken place in your home state or within 100 miles of your home address. However, few issuers impose the $50 or 100-mile rule on purchases made in the United States. MasterCard officials indicate that their debit cards are protected in the same manner.

However, it is crucial that you contact your bank and determine what liability you have under both PIN-based and signature transactions. Many instances, depending on what network it processes through, a PIN-based purchase may not be entirely covered like a signature-based purchase.

A separate money issue
With a debit card, it is likely that the merchant has withdrawn the funds from your account before you even notice that something is not right with your purchase. This leaves with you much less leverage.

If you have your receipt, it is possible that you have a case under your state's unfair trade practices law. However chasing that course can prove to be very expensive and time-consuming.

MasterCard considers all purchases made online with a debit card as a signature based purchases. As a result, customers are protected under zero liability if the customer was displeased with the product of if the purchase was fraudulent.

Before contacting the debit card issuer, consumers must attempt to resolve their dispute with the merchant on their own. In this case, the merchant may prefer to offer a store gift certificate or credit as opposed to refunding your money.

What kind of federal protections do you have with a debit card?
Under the Electronic Fund Transfer Act, you have the entitlement to dispute any errors on your banking statement, and you have a few protections if your debit card is stolen or lost.

If you act fast, the end results are not so bad. if you notify your bank within two days of discovering that your debit card is missing, your liability is capped at $50. If you wait more than two days, you could end up losing as much as $500. If you wait longer than 60 days, you will end up having to pay every dollar of all fraudulent charges made. It is possible that you will lose everything in your checking and overdraft accounts.

However, if your debit card has a Visa or MasterCard logo, you do not have to report fraudulent goings-on within two business days and you will not be held accountable for fraudulent transactions made over their networks. Obviously, you should report missing or stolen cards instantly so you don't get stuck paying an thief's charges.

Spend wisely, simple
As a result of more restricted consumer protections, a debit card may be a better choice when making smaller, routine purchases such as groceries and/or gas. Making payments with a debit card is fast and hassle free, and you will not have to pay a cent of interest.

However, you will not be able to enjoy the float you have when you pay with a credit card or write a check. With a debit card purchase, the money gets withdrawn from your account almost instantly. Therefore it is crucial that you maintain good records.

If you neglect to record a debit card purchase or two in your checkbook, you may end up overdrawing on your account and have to pay significant fees. If you choose to make a larger purchase on a debit card, you will want to carefully inspect the merchandise before purchasing.

For purchases made over the Internet, credit cards are the best option. However, debit cards that have the Visa and MasterCard log offer zero liability policy cover in-store purchases, as well as purchases made over the Internet.



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