It’s widely recommended that you never use a debit card to shop on the web, but do you know why? And no, it’s not because shopping online isn’t safe.
Contrary to public opinion, when it comes to security, shopping online is actually more secure than the regular offline debit card payments you make – which you shouldn’t be making with your debit card, either.
The reasons you never use your debit card online boils down to contingency planning. There are mainly two reasons why you shouldn’t use a debit card for online or offline purchases. This is true even when online transactions require either an additional password or a personal identification number or PIN.
We know the main difference between a debit card and a credit card. The credit card has a limit on how much you can spend, while the limit on a debit card is basically the amount of money you have in the bank. Essentially you are using the money you don’t have when using a credit card while you are using your hard earned money when using a debit card.
So while the high interest debt aspect of using a credit card is a downside that often turns off the general public, here’s one reason why a credit card has an advantage over a debit card.
If your debit card is compromised due to online frauds because they happen, you can potentially lose all the money you have in your bank account.
On the other hand, if your credit card is compromised, you will lose, in the worst case, all the credit you have.
Who pays when you are the victim of credit card fraud?
It is rarely the consumer. Instead, the responsibility usually rests with the merchant or bank that issued the card. You, the consumer, are usually not responsible for credit card fraud, but someone foots the bill.
So who foots the bill when a thief illegally uses your credit card or number? The answer is that this is usually the merchant you purchased from or the bank that issued the card. It depends on the circumstances.
Rarely do cardholders pay in such a situation. If a credit card has been compromised, the card issuer usually revokes the old number and issues a new card with ease.
Why? This is because banks and credit card networks, such as Visa and Mastercard, have policies that promise consumers will not be responsible for unauthorized charges, often referred to as “zero liability” policies.
In most cases, in the event of theft or unauthorized use of your credit card, most laws around the world state that you are responsible for what are commonly referred to as âfraudulent chargesâ.
However, if you report the loss of your card before fraudulent charges arise, you will not assume any financial responsibility.
It’s not your money that’s available to you with a credit card
When you spend money with a credit card, you are spending the money in your bank, although once the purchase is made it becomes your responsibility.
So, after making the purchase, you have to pay, along with any fees or interest that the bank may charge you. This gives you some kind of protection in the event of fraudulent activity.
Even if your credit card is compromised and used without your permission, it is the bank’s responsibility to manage and prevent fraud, not yours.
In the event of misuse of your card, you can always explain to the bank why it is fraud and that you are not responsible for it.
In most cases, banks will investigate transactions and when they find out that your allegations are true, they will not significantly charge you for the fraudulent transactions.
Also in the event of debit card fraud, you can notify the bank about the misuse of your card and you may be refunded.
How is fraud different – when your credit card is misused versus a debit card?
If a debit card is misused, you will first lose the money, and then – if your bank finds that your claim is true – you will get it back.
If your credit card is misused, you won’t lose money unless your bank later refuses to accept your fraud claim and asks you to pay (which you can still dispute).
In other words, when you spend money with a debit card, you immediately lose money. Your money is immediately deducted from your bank account. In the case of a credit card, it is different.
This is mainly because there is a gap between transactions and when you actually need to pay the money is usually at the end of your credit card billing cycle.
Why is it safer to use a credit card to shop online?
It would be best to use a credit card when shopping for items online, mainly because it gives you the ability to dispute charges through the credit card issuer in the event of fraud.
Card issuers are also better equipped to spot and process fraudulent card transactions. With a debit card, funds are debited (withdrawn) directly from your bank account when the debit is made.
If the online store is hacked, you may lose funds from your bank account. With a credit card, the issuer will temporarily credit your card when you notify them of fraudulent charges.
Some card issuers allow you to create and use a one-time virtual card number when making an online purchase.
This prevents fraud since the merchant (or any intermediary who intercepts the number) cannot use it again or link it to your actual card number.
But what if you don’t have a credit card?
While credit cards are a safer bet for spending online, you might not have access to them. In this case, there are still ways to protect yourself from fraud.
Maintaining a low balance on the account linked to the debit card that you use for online purchases can help limit the size of fraudulent withdrawals, if they do occur. This won’t necessarily prevent someone from accessing your account, but it can limit the damage caused.
You can also turn off any form of overdraft protection (if you have it) on the account used for purchases.
Many banks offer this service (usually on a secondary account), which is automatically withdrawn from a savings account in the event of an overdraft on the secondary account.
In case of fraud, this basically means that the scammer has access to two accounts instead of one. If you have overdraft protection in place, be sure to check with your bank to find out how and when it applies.
Another way to limit your liability is to use a prepaid debit card. If someone accesses the account, they will only have access to what you have loaded on the card.
The bottom line?
From a legal standpoint, credit cards generally offer better protection against fraudulent activity. But, there are ways to mimic some of these protections with a debit or prepaid card.
Deciding what is best for you will help protect your money, whether you’re spending online or sneaking into the store.