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--Using
Your Card Wisely
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vs. Credit Cards
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PROBLEMS WITH DEBIT CARDS
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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