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 at all, and they both have plenty of pros and cons. The amount of liability you face with credit cards is also drastically different than what you face with debit.

If you’re wondering about how debit cards and credit cards work, or how the chance for debit card fraud compares to the risk of credit card fraud, you would be wise to pay attention. Keep reading to learn about debit card safety and situations where paying with a credit card could leave you better off.

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 then deducted from your own 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 you can make a minimum payment and carry a balance to the next month (or months). When you don’t pay your credit card balance in full, credit card interest begins accruing.

When it comes to security, credit cards come with features like encryption, chip and pin technology and fraud monitoring that help keep your information safe. More importantly, credit cards tend to come with zero fraud liability policies that ensure you never pay a cent for fraudulent purchases charged to your account.

Debit cards can also come with similar security features, such as encryption and chip technology. However, debit cards are much less likely to come with zero fraud liability policies, which leaves you more vulnerable to financial losses if debit card fraud occurs.

How does fraud happen?

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

  • 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 take place. 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 2 business days after you learn about the loss or theft. And if you report the fraud more than 2 business days after you learn about the loss or theft, but less than 60 calendar days after your statement is sent to you, your liability climbs even higher to $500.

Crazy enough, 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.”

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.

How to shop safely with a card

Every form of paying comes with its share of risks, and that’s even true with cash. After all, using cash for payments leaves you vulnerable to theft or losing your money altogether. If your stash of cash for bills or regular expenses disappears, the only thing you can do is file a police report and hope for the best.

With a credit card or debit card, on the other hand, you have an issuing bank or credit card issuer who can advocate for you. Plus, there are plenty of steps you can take to ensure your credit card and debit card purchases are safer.

For example, the FTC says you should never disclose your account number or card details just because someone asks. You should also guard your account information so it isn’t easily viewed or accessed by the public.

The FTC also says you should:

  • Never sign a blank charge or debit slip
  • 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
  • You should never carry your PIN number around with you. Memorize it instead, or write it down in a place only you have access to.

The bottom line

The debate between credit cards vs. debit cards may never be entirely settled, but it is pretty safe to say that credit card transactions are less risky in general. Since most credit cards come with zero fraud liability policies, and since they don’t deduct money from your bank account anyway, you can use credit for purchases without worrying about fraud affecting your accounts or leading to financial losses.

Either way, there are steps you can take to make your transactions safer and stop debit card fraud and credit card fraud in their tracks. Both options are safe, but you can make your transactions safer with some common-sense precautions.

Written by
Holly D. Johnson
Author, Award-Winning Writer
Holly Johnson began her career working in the funeral industry, which may make you wonder why she works in personal finance now. Yet, the funeral industry taught the author everything she needs to know about the value of one's money and time. Johnson left the mortuary business a decade ago in order to explore her passion for personal finance and travel the world, and since then, she and her husband have built a debt-free lifestyle that has them on the path to retire very wealthy in their 40s. Holly's love of budgeting also led to the creation of her debt payoff book, “Zero Down Your Debt: Reclaim Your Income and Build a Life You’ll Love."