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Credit card vs. debit card: Which one is safer?

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Paying with plastic can be infinitely more convenient than paying with cash, but the type of plastic card you pay with still matters. After all, credit cards and debit cards don’t work the same way, and they both have plenty of pros and cons.

If you’re wondering how debit cards and credit cards work, how the risk of fraud compares across these different payment methods and when it makes sense to pay with a credit card vs. a debit card—keep reading.

Credit card vs. debit card: What’s the difference?

A debit card is a type of banking product that is usually tied to your checking account. When you make purchases with a debit card, the money is deducted from your account balance.

Conversely, credit cards allow you to access a line of credit you can borrow against. When you make a purchase (or multiple purchases) with credit, you can pay your balance in full or simply make a minimum payment and carry a balance to the next month (or months).

Here’s a look at some of the pros and cons for both:

Pros and cons of using credit cards

Pros Cons
  • Responsible use could help you build a strong credit history.
  • Most credit cards include zero fraud liability policies that protect you from paying for fraudulent purchases charged to your account.
  • Credit cards use encryption, chip-and-pin technology and fraud monitoring to help keep your information safe.
  • Credit cards offer greater purchasing power and can also come with lucrative sign-up bonuses, interest-free introductory offers, discounts, cash back and travel points.
  • Interest begins accruing when you don’t pay your balance in full.
  • Overspending or failure to make on-time payments could severely damage your credit score.
  • Credit cards can be more difficult to acquire if you do not have an established credit history.
  • You may be required to pay a steep annual fee.

Pros and cons of using debit cards

Pros Cons
  • Money draws directly from your checking account, which could help you avoid more debt.
  • Debit cards typically do not carry an annual fee.
  • They use encryption and chip-and-pin technology to keep your personal information safe.
  • Debit cards are easy to get, even if you have poor credit.
  • Using a debit card won’t help you build a good credit history.
  • You could miss out on some money-saving rewards by only using your debit card to make purchases.
  • You’ll likely face monthly maintenance fees, overdraft fees and foreign ATM fees.
  • Debit cards are less likely to come with zero fraud liability policies, leaving you more vulnerable to fraud.

How does fraud happen?

Debit card fraud and credit card fraud can happen in many different ways, and often when you least expect it. The following situations are some that commonly lead to fraudulent purchases being made on these cards:

  • Stolen cards and account numbers
  • Data breaches
  • Phishing emails
  • Account takeover
  • Identity theft

While plenty of fraud is high-tech, there are also not-so-obvious situations where credit card fraud or debit card fraud can occur. For example, you might give your credit card to a shop owner who goes to the back and writes down your credit card number and details without you knowing. Or perhaps someone tries to commit credit or debit card fraud after digging through your trash and recovering your account statements.

Debit card fraud liability

According to the Federal Trade Commission (FTC), time is of the essence when it comes to discovering and recovering from debit card fraud. If someone gets their hands on your card or your account numbers and begins making fraudulent purchases, the time it takes for you to report it can determine how much liability you have.

For example, the Electronic Fund Transfer Act (EFTA) says you have $0 liability for fraudulent purchases if you report your card or card numbers stolen before unauthorized purchases are made. However, your maximum loss jumps to $50 if you report within two business days after learning about the loss or theft. And if you report the fraud more than two business days after you learn about the loss or theft, but fewer than 60 calendar days after your statement is sent to you, your liability climbs even higher to $500.

It might sound crazy, but your liability may be unlimited if you report fraud more than 60 calendar days after your statement is sent to you. In fact, the FTC says you may be on the hook for “all the money taken from your ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account.”

However, it’s important to note that newer debit cards are now beginning to offer protections similar to those offered by most major credit cards.

Credit card fraud liability

When credit card fraud occurs, your liability is limited to a maximum of $50 thanks to the Fair Credit Billing Act (FCBA). But most credit card issuers have zero fraud liability policies that bring your total maximum loss down to $0.

When is it better to use a credit card or debit card?

In a number of situations, it could make more sense to use a credit card than a debit card and vice versa.

Use a credit card if:

  • You’re hoping to accrue credit card rewards and save money on some of your regular purchases
  • You plan to finance a large purchase and spread out your payments over time
  • You want to avoid overdraft charges and give yourself a grace period before your payment is due
  • You prefer an extra layer of protection when making purchases
  • You travel often and require a payment method that may be more widely accepted

Use a debit card if:

  • You want to avoid expensive annual fees
  • You regularly withdraw funds from an ATM
  • You want to save on interest charges over time
  • You want to avoid the temptation to overspend and accrue more debt

How to shop safely with a card

One benefit of using a credit or debit card is that you have an issuing bank or credit card issuer who can advocate for you. And, there are plenty of steps you can take to ensure your credit card and debit card purchases are safer.

The FTC recommends the following practices:

  • Never sign a blank charge or debit slip
  • Guard your account information so it isn’t easily viewed or accessed by the public
  • Never disclose your account number or card details just because someone asks
  • Cut up old cards, making sure to cut through your account numbers
  • Open your account statements promptly and compare them to your receipts for purchases
  • Avoid carrying around extra debit or credit cards you don’t need
  • Never carry your PIN around with you. Memorize it instead, or write it down in a place only you can access

The bottom line

The debate between credit cards versus debit cards may never be entirely settled. And while there are steps you can take to make your transactions safer and stop debit card fraud and credit card fraud in their tracks, each form of payment still carries its own set of benefits and risks. It’s what you plan to use your plastic for that will determine which option makes the most sense for you and your wallet.

Written by
Holly D. Johnson
Author, Award-Winning Writer
Holly Johnson writes expert content on personal finance, credit cards, loyalty and insurance topics. In addition to writing for Bankrate and CreditCards.com, Johnson does ongoing work for clients that include CNN, Forbes Advisor, LendingTree, Time Magazine and more.
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