Survey Shows Many Americans Misunderstand Differences Between Credit And Debit Cards
When you consider the different payment cards in your wallet, do you really know what sort of protection they offer you? A new survey suggests that many people may not fully grasp the difference between the cards they carry, when it comes to how safe they are to use.
Sixty-nine percent of Millennials surveyed believed that debit cards were just as safe as, or even safer than, credit cards, while 49% of Baby Boomers thought this, and 56% of folks who reported using debit cards most often for everyday purchases had the same mistaken idea.
The problem is, debit cards do not offer consumers the same protections as credit cards do, and if they are compromised, debit cards can do much greater damage to cardholders than credit cards can.
Why credit is safer than debit
One reason credit cards are safer than debit cards is that unlike debit cards, credit cards do not deduct payments directly from your checking account. That means there is some cushion built in, in case of hacking. With a debit card, the money will be gone from you account immediately, while a credit card does not take the money out of your account until you choose to make a payment.
In addition, most credit cards offer zero liability for fraud, meaning customers will never have to pay a dime for an unauthorized use of their card. The Fair Credit Billing Act already limits consumer liability to $50, but almost every major credit card extends this to $0. Therefore, as long as cardholders report their credit card as lost, stolen, or compromised, they will not be responsible for charges.
Good credit cards are the best option
With debit cards, however, maximum liability can be much higher, depending on how quickly the fraudulent charges are reported to the issuing bank. If thieves empty their entire bank account, customers may not be able to get any of the money back. If they do get it back, or some of it back, there may be a lag time before the funds are restored, during which time they could be scrambling to cover bills, rent, or their mortgage.
The best and safest option for folks is to get and use a low APR credit card for good credit, which they will be able to do if they have a solid credit score and credit history. Even better, they can get a rewards card that gives them cash back or miles for every purchase they make, while keeping their funds safe from fraud.