Credit vs. debit cards, which is better?

Earlier this week, I had the pleasure of speaking to the Rotary Club of Shadowridge in Vista about how to avoid scams and cons. One of the questions that was asked had to do with the differences between using a debit card and a credit card. The question was, is one better to use than the other?

While a credit card comes with a limit, a debit card is only limited by the amount of money in your account. For most people, this puts an automatic restraining order on their spending. There are other obvious reasons why people prefer one form of payment over the other. For instance, the cards have different fee structures; debit cards have a PIN, credit cards do not; and photo ID is supposed to be required for credit cards, but not for debit cards. The big difference is in what you might be held responsible for if someone steals your card.

Credit cards have a strict $50 legal liability if you notify the credit card company within 60 days of the date of the fraudulent charges. With a debit card, you have two days to notify the bank to get that same legal limit on your liability. The other important disadvantage of a debit card is that because the card goes directly to your bank account, it could be drained almost overnight. Also, if someone steals your card or you become the victim of fraud, you will have to fight every single bounced check charge from your bank as well as from the merchants where your card was used.

The bottom line is that when making purchases online, you may be far better off (from a security standpoint) using your credit card. If something does go wrong and you become the victim of fraud, the battle will be a skirmish, not an all-out war to save your credit. What do you think? Leave a comment whether one makes more sense to you than the other.