Check, Credit, Or Debit Card?
Choosing a Payment Method for Security and Convenience.
 
Published Thursday, August 13, 2009

protections than credit cards. The consumer protections on a debit card are not as strong as on credit cards. The federal Electronic Fund Transfer Act limits your liability for unauthorized or fraudulent withdrawals using your debit card to $50 if you report the loss of the debit card or discovery of the erroneous withdrawal within 2 business days of your discovery of the problem. If you take longer than 2 days but less than 60 days, your liability rises to $500. If you take longer or in certain other circumstances, you could be liable for the total loss (which could be as much as your total balance plus maximum overdraft protection you have). Federal regulations for debit cards offer no protection against a dispute with the retailer over the quality or status of the goods or services — the same as with cash or checks.
  • Possibility of overdrawing your account. If you don’t keep track of your debit card purchases in your account register, it’s easy to overdraw your account, incurring fees for “bounced” charges or possibly for overdraft protection.


    • Credit Cards

    Unlike debit cards which provide access to your own money, credit cards access loans from the card issuers. When you use a credit card to make a purchase, the merchant or service provider is paid for your purchase by the card issuer, then you pay back the card issuer when you pay your monthly statement. If you don't pay off your entire balance each month, you'll pay interest on the unpaid balance. If you pay late, you will incur late fees.

     

    Benefits

    • Convenience. Credit cards are widely accepted for a variety of purchases. They, too, can lessen the need to carry large sums of cash.
    • Flexibility. Because they are loans, credit cards offer a way to manage your cash flow if used wisely. For example, you might need to make a large purchase which you cannot cover out of checking until your next paycheck. Using a credit card allows you to purchase the item today and pay it off when your next credit card statement arrives.
    • Good consumer protection. The Fair Credit Billing Act provides several consumer protections. First, your maximum liability for fraudulent or unauthorized use of your card or account numbers is zero if you report the card lost or stolen before it is used and $50 if you report the loss after an unauthorized use has occurred. If your account number only is stolen (you have the card secure), your liability is zero. Many card issuers offer zero liability for all fraudulent use. Second, the law offers protection if you have a dispute with a merchant over a billing error such as an overcharge or charge for goods that were not delivered and you follow the rules for reporting it. Third, the credit card regulations allow you to stop payment under certain circumstances. All these protections can be exercised without your paying any money from your funds.
    • Emergency access to cash. While it is prudent to save ahead, you many not have the savings to pay for a major car repair or replace a dead washing machine for example. A credit card allows you to spread the cost of the unexpected into more affordable monthly bite-sized pieces.
    • Record keeping. Monthly statements provide a record of all expenditures made with a credit card.


    Cautions

    • Running up debt. Credit cards make it easy to buy items we want but can’t really afford. Too often, our “buy now, pay later” mentalities foster impulse purchases. Remember Americans have $800 billion in debt on credit card balances.
    • Interest and fees. Credit cards purchases are loans on which you pay interest if you carry a balance. The average purchase interest rate was 14.53% in the 2007 Credit Card Survey conducted by consumer-action.org. But many cards have higher rates, particularly if your credit history is not good. If you pay a bill late, you will typically incur a late fee, average $28 and often higher. And paying your bill late, even one day late, may trigger a higher interest rate. And there are other possible

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