Making a return with debit card can be tough
|By Lucy Lazarony Bankrate.com
Debit cards have become one of
the most popular ways to make everyday purchases, but when buying
big ticket items, most experts suggest using credit
Why? Well, your credit card purchase
is protected under a law called the Fair Credit Billing Act, which
basically means you have zero liability for fraudulent purchases,
poor-quality or damaged merchandise or for merchandise that was
never delivered. It's the law.
"It's wonderful. It's a great law there,"
says E. Thomas Garman, author of more than 30 books on personal
finance. "You've got Visa on your side."
With debit cards, both Visa
and MasterCard also offer
zero liability for unauthorized transactions made over their networks.
Visa says U.S. issuers must comply with its policy, unless they
can prove negligence on the part of the cardholder, such as throwing
the card, intact, into a dumpster. MasterCard's policy also has
a negligence exception and covers cardholders who don't have a delinquent
account and haven't reported two more "unauthorized events" within
the last 12 months. However, that zero liability is a policy --
not a law -- on debit cards and therefore subject to review by the
"The industry is doing that out of a sense of
fair play, out of the goodness of their hearts," says Jeanne
Hogarth, program manager for the consumer education and research section at the Federal Reserve
Board. "They could change that policy tomorrow."
Times have certainly improved for consumer debit card
use. In the past, many merchants treated a PIN-based debit card
purchase as they would a personal check or cash. If the product
was unsatisfactory, you might get stuck with several hundred dollars
in store credit instead of a refund. Now, policies have changed
in favor of debit card transactions, offering more protection and,
in many cases, zero liability.
Debit cards, such as the Visa Check Card and MasterCard
Money, are linked to a cardholder's checking account and can be
used to make purchases just about anywhere credit cards are accepted.
But don't let the word "Visa" on the front
of the card fool you. You don't have the same consumer protections
with a PIN-based debit card as you do with a credit card. According to Visa, PIN-based transactions may process through non-Visa networks, which may or may not match Visa's zero liability policy. The financial institution that issued your card will decide your liability in cases of fraud. Signing for purchases ensures that the transaction processes over the Visa network and falls under the protection of the zero liability umbrella.
With a credit card you have the option of withholding payment should
you be unsatisfied with the quality of an item. Ditto for an item
purchased with a personal check. You simply call your bank and ask
them to stop payment before the check clears.
But, there are a few catches. The sale must be for
more than $50 and have taken place in your home state or within
100 miles of your home address. But few issuers enforce the $50
or 100-mile rule on purchases made in the United States. Visa officials
say their debit cards are protected in much the same manner.
"Visa check cardholders are protected by Visa's
zero liability policies, which far surpasses protections made by
federal law," says Rosetta Jones, vice president of corporate
relations for Visa.
But, it is important to contact their bank to find
out what liability they have under both signature and PIN-based
transactions. "Many times, depending on what network it goes
through, a PIN-based purchase may not be totally covered like a
signature-based purchase," says Jones.
A different money matter
Also, with a debit card, which yanks money from your bank account
almost immediately, there's a good chance the merchant already has
your money by the time you realize something is wrong with a purchase.
So you have a lot less leverage.