Credit Card vs Debit Card: Which to Use Online?

No matter what method of payment you use – credit card or debit card – there are risks with any transaction. But in today’s technology-dependent age, online purchases may come with higher risk, whether you pay with a credit card or debit card.

Online shopping requires you to enter your personal payment information into electronic forms which, of course, are prone to data breaches and hacking. There are constant stories in the news of large companies suffering breaches in their security systems with their customers information stolen.

Despite the risks, you’ll want to make an online purchase at some point. Are credit cards safer than debit cards? Or are debit cards safer? Lets take a closer look.

Credit Card Fraud Protection Online

Credit cards have financial protections under the Fair Credit Billing Act which protects against inaccurate and unfair credit billing and credit card practices. If there is a data breach leading to fraudulent charges on your credit card account, you are protected from liability under most circumstances.

Credit card purchases are automatically eligible for purchase protection which usually covers theft and accidental damage. Each credit card company will offer specific terms and timeframes for submission. However, purchase protection is a standard feature across the industry.

Most credit cards also offer an extended warranty on consumer goods. For example, if you purchase a television on your credit card, the standard factory-issued warranty automatically doubles under some credit card terms.

Now, there are of course a few downsides to using credit cards. Every time you make a purchase, you are going into debt. If you can pay the credit card debt off in full every month, it won’t cause any long-term financial damage. However, if you cannot meet the payment schedule, credit card debt can quickly escalate with compounding interest.

If you suspect credit card fraud on your account, contact your credit card provider immediately. Depending on the situation, they may be able to reverse the transaction or provide other financial protections to resolve the issue.

Debit Card Fraud Protection Online

So, is it safe to use a debit card online? In general, there are fewer protections with debit card transactions than there are with credit card transactions. According to some experts, you should avoid using debit cards for online purchases as much as possible because they come with higher liability that can be potentially limitless. Fraudulent charges can also be more challenging to dispute with your debit card provider as opposed to a credit card provider.

Consumers are protected up to a certain extent when they use any electronic means to pay for goods and services, according to the Electronic Funds Transfer Act. This includes debit cards. The protections are, unfortunately, only applicable if reported within a given timeframe. After 45 to 60 days, your bank usually offers no compensation for fraudulent activity under your account.

Unlike a credit card, a debit card offers no consumer protections in most cases. If you suspect fraudulent or erroneous activity on your debit card after an online purchase, report the problem as soon as possible to the provider. The longer you wait, the more liability you face, from $50 after two days to unlimited liability if you fail to report the problem within 60 days.

Are Credit Cards Safer Than Debit Cards?

In almost all cases it’s better to make your online purchases with a credit card because of the extended consumer benefits. Not only do credit cards usually come with extended warranties, and purchase protections, they have a much better track record of protecting their customers from fraudulent charges.

To better protect yourself regardless of the payment method, only buy from trusted sources online. This means only from websites starting with “https” and with the small lock symbol in the address bar, which indicates security. This is one small added level of protection in a world where risk of data breaches abounds.