Credit Vs. Debit: Which Card Should You Use Online?

Avoiding online commerce in 2016 is sort of like avoiding the sun in July, or the Kardashians on Twitter. Love it or hate it, at some point you’re going to cross paths with it, and it’s best to be prepared for the moment that you do make an online purchase.

For most of us, though, buying online is as natural as breathing. We do it so often that we barely think about it. But, any time you spend money, it’s worth thinking about. Your different payment methods are processed in very different ways — even if the money is all coming out of the same account.

Where The Money “Comes From”

When you use a debit card, the money goes directly from your bank account to the store you’re purchasing from. There are a lot of times when this is fine (and even useful). If you’re making a purchase that depends on an international exchange rate, having that money go through immediately (aka, straight from your account to the item provider) may be best for you; the exchange rate should be locked in at the time of purchase, but there might be a slight delay with the credit card purchase.

If you’re paying bills on an automated system from a small checking account balance and need to watch your balance carefully, having that money go in and out of your account immediately is also helpful. (Editor’s note: if you have an account with more funds available, look into processing your automated payments through a credit card; that will help you build up your credit score).

When you pay with a credit card, the payment is processed by the credit card company. Credit transactions usually carry a fee that the person you’re buying from has to pay. This is why so many small businesses discourage credit card purchases by having a card payment minimum or offering a price discount for debit and cash payments. But, the fact that your money goes through a credit company whose only job is to handle transactions means that the credit company usually builds in some extra protection.

What Kind Of Fraud Protection Do I Have?

Say somebody gets ahold of your card number. Now, obviously, you don’t want that. Identity theft is nothing to mess around with. But if it happens, your fraud protection is actually covered under two different laws, depending on the kind of card you use.

If you use a credit card, you’re covered under the Fair Credit Billing Act. The FBCA says that the maximum liability for unauthorized credit card use is $50, but when the card is used online, it’s zero -– you’re not on the hook, no matter how large the dollar amount. Moreover, a lot of credit card companies offer their own liability protection that extends even further than what the government requires.

Debit cards, on the other hand, are covered by the Electronic Fund Transfer Act. You still have a lot of protection under this act, but you have to pay attention. If your PIN or debit card is stolen, you must report unauthorized charges within two days of discovering the problem to qualify for the same protection that credit cards have (card owner is liable for $50 offline, $0 online).

After that, the rules change, depending on your debit card provider. In certain cases, your liability rises to $500, and you have to report the fraud within 60 days of the bank statement listing the false charges (if you report after the 60-day mark, you could be on the hook for the full purchase amount). In other cases — as the Wall Street Journal reports — if the PIN or card is not stolen, then the card owner is not liable for any amount of the false charges.

What If I Need To Dispute Something?

Credit cards make it a lot easier to withhold payments or dispute charges. Again, this is because the money isn’t coming straight out of your bank account — it’s going through the card company first. That can make a big difference to your financial health, depending on how long it takes to resolve the dispute. Many banks make it easy to dispute charges. A bank that’s worth your business will fight for you.

What Are Some Pitfalls Of Both Card Types?

If you’re using a credit card, watch out for that credit limit, and make sure that you pay your balance every month. You don’t want to be charged interest for a dress you saw on The Mindy Project if you already have the money to pay for it in your checking account. Check your monthly credit balance and pay it off in full.

If you’re using a debit card to make online purchases, you might consider turning off your overdraft protection. If someone steals your card information and begins making purchases (and overdrawing the card while your overdraft protection settings kick in and make automated transfers), then you’ll be in the hole with the bank and you’ll owe overdraft fees. Let the bank decline the card if it’s overdrawn.

What Other Options Do I Have?

There are dozens of online payment apps available now. Google and Apple both have digital wallet services that let you tap your phone to a register to pay. What makes these services secure is that Apple, for instance, only ever has your credit or debit card number for one step of the process. Apple talks to your bank and gets the card authorization; then, Apple creates a new card number for an added layer of security.

The downside is that, while these new apps will work in a lot of stores like Best Buy, these payment platforms don’t always work in regular online retailers like Amazon. PayPal likewise offers a level of removal between your bank and a business, but again, PayPal isn’t accepted everywhere online, which can put you in a bind if you rely on it exclusively for internet purchases.

And, of course, your data is only safe as long as PayPal is. They boast about their encryption, and they claim that they hire hackers to try to break their security to show them where flaws are. But PayPal’s security isn’t the only point of weakness -– you are a point of vulnerability, too. If someone gets your password (or if you use the same password for multiple places), a thief can do some major damage to your bank account. PayPal offers $0 liability, though, as long as you catch the fraud within 60 days. That’s pretty generous, but that time constraint is a factor.

So Which Card Should You Use Online: Credit Or Debit?

All in all, you’re best off using a credit card online. The level of security is higher, and the vigilant monitoring that the credit company provides for all transitions between your bank account and the online business is greater. Having a credit company to act as a buffer helps keep your accounts safe when you’re shopping online.

Garrett Steele is your friend. He is a writer of internet articles and he will gladly write music for you (if you ask him nicely and pay him cash money). One time, he accidentally broke into the grounds of the Vienna National Gallery; in his defense, they’re the ones who left the gate open.

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