Useful Credit Card Rules and Laws - What About Debit Cards?
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BY Ken Tumin
The Consumerist article titled "10 Things You Might Not Know About Your Credit Card" has some useful information regarding credit cards. Out of the 10, I found the following most useful to know:
With the rewards checking accounts requiring debit card usage, some readers have expressed concern about debit cards lacking the liability protection that credit cards have. With credit cards, it's nice to know that you're liable for a maximum of $50 for unauthorized use. There doesn't seem to be the same protections for debit cards, and unlike credit cards, when you buy something with a debit card, the money comes right out of your checking account. Here's what consumer advocate Clark Howard says:
One thing we can do to reduce problems with our debit card use is to limit it to small purchases. Stick with credit cards for large purchases and purchases over the internet. Using credit cards for large purchases also has the advantage of earning cash back rewards. I'm continuing to do more research into this issue of debit cards. If you've already looked into this, please leave a comment.
To learn more about reward checking accounts, please refer to my High Yield Checking website.
The Maximum Liability For Unauthorized Use Of A Credit Card* Is $50 According To Federal Law
Merchants Cannot Require A Minimum Transaction Amount
Merchants Cannot Charge A Surcharge For Using A Credit Card, However, They Can Offer A "Cash Discount"
With the rewards checking accounts requiring debit card usage, some readers have expressed concern about debit cards lacking the liability protection that credit cards have. With credit cards, it's nice to know that you're liable for a maximum of $50 for unauthorized use. There doesn't seem to be the same protections for debit cards, and unlike credit cards, when you buy something with a debit card, the money comes right out of your checking account. Here's what consumer advocate Clark Howard says:
Sure it looks like a credit card, and it works similarly to one, but it can really foul you up in ways that a traditional credit card can not.
One thing we can do to reduce problems with our debit card use is to limit it to small purchases. Stick with credit cards for large purchases and purchases over the internet. Using credit cards for large purchases also has the advantage of earning cash back rewards. I'm continuing to do more research into this issue of debit cards. If you've already looked into this, please leave a comment.
To learn more about reward checking accounts, please refer to my High Yield Checking website.
When you use it as credit it is processed through the mastercard network, if you use debit it is processed through an ATM network, ie allpoint or star.
However, I do believe a bank has to join a certain program for its debit cards to have those mastercard benefits. So check with your bank! Or come to Fifth Third, we have awesome cd rates right now haha
But, despite the #50 limit on CCs, most Ive heard of wont even make you responsible for ANYthing.
I wonder if the banks so the same for debitcards ?
Id like to see banks allow us to put a maximum tranaction limit on the debitcard so the possibility of losing big # is reduced.
Id like to see banks allow us to put a maximum tranaction limit on the debitcard so the possibility of losing big # is reduced."
Major banks around here do. In fact at Fifth Third you can set the limit you want. Something very annoying with our system tho is the MAX you can limit it to is only $4500. So if you want to make a very large purchase you have to write a check.
So again, check with your bank. A lot of people don't even realize there is a limit, even less know you can change it to your liking.
On the other hand many charities will accept even 10¢ because they probably get free card processing. I use several of them to meet my Reward checking requirements. There is a site that advertises that you can just charge 30¢ and he makes a profit in the deal.
I doubt it, so no, it does not have the exact same protections.
If I use a credit card there is no way I will go to an ATM and be denied money from my own checking account because of a transaction processed on my credit card.
Regarding using Credit or debit, the merchant WANTS you to use debit while the banks want you to use Credit.
Aldi only takes debut.
Say someone gets ahold of your debit card number (or you don't notice your card is missing) and goes on a shopping spree. Until you realize what has happened, all of your checks will bounce. Most people don't check their account balances hourly or even daily or weekly. The first time most people will realize there is a problem is when their landlord calls and tells them their rent check bounced.
Yes, you do have rights with a debit card and most banks actually cover you for more than the law requires. But that won't help you when checks you wrote for your rent, mortgage, utility, and credit card bills bounce while the money is missing from your account, even if the bank later returns the money.
That is exactly the point. With an ATM card, PINS are a must for each transaction. With Debit/Check cards, when they process it through the "credit" button, it does NOT require any pins. It's processed as a credit card transaction and a signature is all that's needed--if at all.
My biggest concern--and it's the primary concern why I have not opened a rewards checking account--is that one is forced to frequently use, and thus carry regularly, a debit/check card. If my wallet were to be stolen and the thief discovered that I had this debit/check card in my wallet, he can go on a spending spree and take out thousands (25k-50k depending on the reward checking account) before I discover the theft. But unlike a credit card, the charged amount is immediately taken out of my checking account. Even if I dispute the charges, that amount is already gone from my account. I won't have immediate access to my own money during this dispute resolution process. Credit cards are completely different in that it was never your own money that was "charged/stolen". Your own money is still safely tacked away in your own separate checking/savings account.
Additionally, don't let the fact that MasterCard or Visa having certain policies delude you into believing that would be equal to federal law protection.
Whatever MC/Visa implement as policy, they can just as quickly change/alter/rescind. And you'd have to fight/litigate MC/Visa through civil court for your remedies. Whereas with federal law protection, you're well protected and you'll have the FEDs on your side to prosecute if the violations are flagrant and widespread enough.
Bottom line, MasterCard/Visa having their own policies is NOT enough. We need federal law that will protect check/debit card transactions in the same way as credit card transactions are currently protected.
I do NOT feel safe at all carrying a debit/check card with me on a daily basis. In fact, I have NEVER accepted any debit/check cards to date. I have always declined them and asked for an ATM card replacement. I strongly feel debit/check cards are just catastrophes waiting to happen if you carry them with you on a daily basis.
ATM cards are much safer than debit/check cards because of the PIN code required for any and all transactions.
I would feel much better if ALL debit/check cards required a PIN code for any and all transactions just like the ATM cards currently. Then I would feel somewhat assured even if my wallet was stolen.
Banks try to send you a debit card instead of an ATM only card. I always cut them in half and ask for a ATM card.
There is no good reason to have a debit card.
As a former (reformed?) banker, I'd never use a debit card.
Debit cards are for the convenience of the _bank_, not the consumer.
With a credit card you can do a charge back on any amount of a purchase, if your not happy with you purchase. Most banks say they can't with a debit card.
within half an hour each month and then forget about it. My DC is always safe in safe deposit box.
I just carry 3 credit cards on my person a MC, a V and a Discover in my keyring. I use D to get cash at grocery store and don't ever use an ATM machine to withdraw cash.
within half an hour each month and then forget about it."
How about some examples of these small online transactions so that we can all analyze and see if it'll work for our banking needs.
But it is the same sort of protection. The bank has nothing to do with it. The bank submits a dispute to mastercard/visa, they issue the refund.
Which lists the benefits we've come to enjoy with our mastercard credit cards.
https://www.53.com/wps/portal/pv?New_WCM_Context=/wps/wcm/connect/FifthThirdSite/Personal/Credit+%26+Debit+Cards/Fifth+Third+Bank+Debit+MasterCard/
With a checking account, yes it comes right out of your checking account. But it doesn't come off your credit card bill until they've decided you aren't liable for it either.
Very true. But at least my rent check won't bounce between the time that the thief takes the money (which may be days before I first realize there is a problem) and the time the bank makes its decision.
Debit cards have one advantage I don't believe was mentioned here:
'Cash back'
You can make a $15 purchase (e.g.) and ask for $20 in cash, making your total purchase $35.
I've found this useful when I needed cash and wasn't near a bank that wouldn't charge me an ATM fee to make a withdrawal.
As for the fellow who makes 25 cent credit card purchases, well . . .
True, however you don't have to pay any disputed amounts until they are resolved with a CC, however it leaves your checking account ASAP even if you dispute it and then you wait for it to come back.
As for the cash back aspects of a debit card, if you use the card with a PIN you have NONE of the Visa or Mastercard protections.
Thanks for offering your studied comments. I'm sure we all appreciate it.
Are there bills being pushed in Congress to further protect DC users?
By the way, as to the comment at 4:42, it isn't the banks that define "report immediately," it's federal law, and immediately is either within two days of discovering the loss/fraud (to avoid the extra $450 to $500 of immediate fraud loss) or to avoid unlimited losses later on, within 60 days of the bank's mailing (not the customer's receiving, as I said in my earlier post--I constantly confuse that rule) the first monthly statement with a fraudulent debit on it.
I would be happy to continue this discussion if you want more detailed information at jkilborn at jmls.edu.
I would agree that one should not physically carry it but try to meet the requirements by online transaction only.
One should carry just one MC & one V in your wallet.