I work with a lot of smart engineers who use their debit cards all the time. The points in this article are applicable to anybody. Use a credit card and PIF every month. You'll be far better off. And to sweeten the deal, get a card that'll pay YOU. I earned 2.57% cashback on purchases in 2009.
Indeed - it's a cultural thing. I know many people who've had it drummed into them by their parents "credit cards are evil". Of course they're not, they're just a tool. And if you are worried, use a charge card instead (this is what I do).
I had to actually check wikipedia to see what a "charge card" was because I've always always heard it used synonymously with "credit card." In fact, I always assumed it was just an old name for "credit card." It would appear that is not the case. Perhaps that speaks to the power of credit card marketing in the US - or maybe I'm just ignorant. :)
I wonder how applicable these concerns are to European debit card users, where Chip and PIN is more widespread - certainly in e.g. UK, Ireland, France etc. (though not e.g. Belgium, which have their own oddball system). Portable card readers are generally used for payments in restaurants, for example, so it's perfectly reasonable to not let your debit card out of your sight here.
Similarly, gas stations are often completely automated, and even where they aren't, you don't even hand your card over to anyone - you put it in the card reader yourself.
Online, my use is dependent on how much trust I have in the vendor. If it's Google, I use a debit card. If it's Paypal, I use a credit card.
> Similarly, gas stations are often completely automated, and even where they aren't, you don't even hand your card over to anyone - you put it in the card reader yourself.
There have been reports of gas station card readers that recorded information for use by thieves.
IMO you'd be pretty foolish to use your debit card anywhere. The Visa or MC logo give you a false sense that it has the same fraud protection and benefits as your credit card. It does not. And it has a great deal more potential to disrupt your life in the event of fraud.
And moreover, signature based debit card transactions make the bank the exact same amount of revenue as the same transaction on a credit card. As long as you pay the card off every month then what we're talking about wrt revenue is the discount rate. A merchant provider doesn't distinguish between types of cards-- they all have the same fees-- they only distinguish between issuer (Visa/MC vs Discover and Amex).
I've had two erroneous charges on my debit card and Bank of America refunded my money before they started an investigation. It had a minimal impact on my day.
Of course this is anecdotal evidence so take it with a grain of salt.
Second, there is a common scam that debit cards are susceptible to and credit cards are not. It goes like this: I steal your debit card info. I mail you something trivial. A trinket. Cereal box stuff. I send it USPS Signature Confirm. It has "Reward Dept" listed on the outside and you sign for it.. I mean, why not? You're perplexed by the contents. Somebody spent $3 to mail THIS?
I charge your debit card. Hundreds of dollars. Not usually thousands, not big enough to make FBI radar screens.
You call Bank of America. They give you a preliminary refund. They investigate. They call me, the perpetrator, as part of the charge back process. I say "Oh, well, I have A. Brown's signature from USPS, as you can see right here."
They take the money out of your account. They call you. You are incredulous. You ask for a supervisor. You demand "So if I buy a laptop and they mail me a brick, you can't help me? Just because I signed for it?" They explain that "How would we know? You'll have to sue them to get your money back."
You see, there's a very big difference. With a credit card, the bank is on the hook, until you pay your bill. Until you pay, the fraud is perpetrated against THEM. And federal law gives you right NOT to pay a disputed charge. With a debit card, you are the victim. Hell, the bank even made 2-3% on the fraud.
Not to mention, as I replied above, I make between 2 and 3% cash back each year on my credit cards. We're not rich, but even at our spending, that's a nice chunk of money each year. Far better than the measly "points" some debit cards offer.
(Edit: And in the same vein, once you pay your CC bill, you lose most your rights and conveniences for dealing with fraud. That's why it's important when using things like BoAs ebill initiated payments to still review your statements before you pay the bill.)
I was confused for a moment until I realized you were likely talking about check cards issued by credit card companies; here (Canada), "debit card" refers to a piece of plastic given to you with your bank's name on it and a nonstandard serial number, that can't be used online in place of a CCN, and has always required a PIN number, even before chip-and-PIN was established.
Here, they have a much different fee structure than credit cards for supporting businesses, so some businesses choose to not support one or the other for small purchases where it isn't "worth it" to them. Also, there's no way to put a "hold" on this kind of card—it's basically an immediate wire transfer, not a cash advance, and the terminal you use a debit card in doesn't (can't) store anything that could be used to charge you further after the fact. Thus, they're much more widely used here, because the amount that shows up on the keypad is the amount your account will be charged, never more or less.
The only problem with them is that, unlike with credit or check cards, they have to be able to directly dial their own bank infrastructure (via an agreed-upon protocol, here called INTERAC) to function. Thus, in a foreign country, it's much easier to just use your credit card.
When the banks ask me if I want a debit card, I say no. I have a credit card and I have an ATM card that cannot function as a debit card. Much less risk for me.
It's actually a credit union, which is far better IMO than a traditional bank. I have a business account at a bank who wouldn't give me an ATM (non debit) so I immediately cut it up.
I've used my debit card as my default method of payment online, in restaurants, at gas stations, etc. for about 15 years and have had very few problems doing so. Certainly no greater problems than simply using a credit card, in my experience. This article is almost entirely FUD, there aren't any truly good reasons to not use a debit card today.
No FUD here. You've been lucky, many people haven't. There's good odds you won't be a victim on account of Debit Card use, but you're far less exposed when using Credit and there's absolutely no downside to using credit over debit if you PIF.
See my reply to abrown above, who, like you, mentioned he's been "using debit for 15 years without problems."
Good for you, but you're wrong to call FUD. The scam I explained to abrown is just one of many downsides to debit over credit.
It also leaves out the half dozen wonderful benefits good CCs have. Things like automatic doubling of a manufacturers warranty, price matching if a price drops within 30 days of purchase, very generous cash back, defect, damage, and theft protection, federally guaranteed fraud protection & rights. Etc. I could go on. No FUD here, debit cards are risky.
Many people haven't been lucky with credit cards, does that mean credit cards are unsafe as well? A lot of the "risks" of using debit cards are hypothetical or extremely rare scams. The more common frauds can impact credit or debit card holders alike, and typically have robust protections and straightforward remedies.
These "don't use debit cards, they're risky!" warnings are extremely reminiscent of the BS TSA regulations. They don't represent a sane, robust risk assessment, they represent merely an overreaction to certain very unusual risks.
I'm not sure what "extremely rare" means, and I don't have any facts one way or the other.
What I do know for certain is that credit cards have a number of federal regulations protecting consumers from fraud, and debit cards do not. I also know that with debit card fraud, it's YOUR MONEY that's stolen from you. With CC fraud, it's not.
Most importantly, I know that a CC is superior to a debit card in every way. That there is definitely more risk with a debit card, and absolutely no reason to accept that risk, unless you cannot qualify for a credit card. And because of that, I think that doing what you did here, advocating that any skepticism of debit cards is "FUD" is irresponsible. That's why I've replied.
Internet, identity and "Credit Card" fraud (including debit cards in that) is the fastest growing category of crime in the country according to the FBI.
"I know that a CC is superior to a debit card in every way."
Then why do they still exist? Yes - this is a snarky question, but a valid one, IMO. If they are so obviously bad and horrible, why do they even still exist? Why is there even a debate?
