Debit Cards Lack Credit Card Power
No doubt, debit cards are convenient and popular, but they lack the power of regular credit cards.
Even though they do not offer a line of credit and cardholders can only spend up to the amount they have deposited (pre-funded) into the debit card, their popularity is nonetheless rising.
The lack of power doesn't end there, either. Debit cards don't offer the same liability protections as traditional credit cards.
Fact is, debit and credit cards are regulated by different laws because a credit card transaction is similar to a loan. When a credit card is lost or stolen, consumers are responsible for only $50 of any fraudulent use.
With a debit card the liability varies, by law. The loss could be limited to $50 if a cardholder notifies the financial institution within two business days after learning of the loss or theft of the card or personal identification number. Beyond the 48 hours, the cardholder could lose up to $500.
The loss could be even higher if the cardholder doesn't report it within 60 days after receiving a financial statement listing the fraudulent transactions.
Many banks, especially the large ones, are committed to returning siphoned funds within 24 to 48 hours because they want to keep clients. However, it could take the bank 10 days or more to investigate and return the money. And that could lead to bounced checks and their associated fees.
Many banks also provide zero liability, but cardholders should check with their banks about terms and conditions. In 2005, checking account holders paid more than $10.3 billion in overdraft loan fees, according to the Center for Responsible Lending. The study found debit card transactions were the leading cause of overdrafts.
Consumer groups recommend using a credit card you can pay off each month because it builds credit and provides more protections. They also recommend using a credit card rather than a debit card with Internet orders for more protection if the goods are defective or don't arrive.
All debit and credit card users should keep receipts, review statements and check balances regularly. Choose a unique PIN and never carry the number with the card. Contact your financial institution immediately if the card is missing or you suspect a problem.
 Share this Financial Article with a Friend - click here
Webmasters: Free Financial Content for Your Website!
Multiple ways to use our financial content:
1) You can use our RSS Feeds for automatic insertion and updates
2) You can simply link to this article
3) You can copy/paste the HTML code below (do not remove any links).
|
Personal loan and credit card resource serving millions of good and bad credit U.S. consumers.