Banking

Why Your Credit Card is Safer For Big-Ticket Items

Sure, putting that top-of-the-line new plasma TV on your credit card will get you a few thousand miles, but there are other reasons why you might want to consider putting larger purchases on a credit card instead of a debit card.

1. Debit Card = Cash: at least, that’s how some stores see it. Since a debit card is linked directly to your checking account, many vendors treat it the same way they would cash or a check - which isn’t a big deal when checking out - but it is a big deal when making returns. What happens when you purchased something for cash at a store? Oftentimes they only offer store credit in exchange for the defective item instead of your cash back. With a credit card, however, the return is processed using the same card you used to purchase the item.
2. Disputed Purchases: with identity theft on the rise, it is more important than ever to be sure you and your credit are protected. ATM and debit cards, since they are linked directly to checking accounts, aren’t covered under the Fair Credit Billing Act like credit cards are. This law gives you the right to withhold payment on poor-quality or damaged merchandise purchased with a credit card. You don’t get that guarantee with your debit card. In fact, since the money is immediately withdrawn from your checking account, you will be out of cash and stuck discputing any charges with the merchant yourself.

   There is hope though. There are a few federal protections that you have with a debit card. Under the Electronic Fund Transfer Act you have the right to dispute any error on your bank statement, and you have some protections if your debit card is lost or stolen. Bankrate.com reports that your liability is capped at $50 if you notify your bank within two days of finding out your debit card is missing. Wait more than two days and you could lose as much as $500. If you discover an unauthorized charge on a bank statement, you may be on the hook for as much as $500, provided you contact your bank within 60 days.

My advice is to pay for everyday purchases such as groceries, morning hot chocolates, and gas with your debit card. But make sure you have enough money in that account. As I mentioned before, your debit card is connected directly to your checking account - so if there’s not enough funds in that account you could be looking at some steep fees (unless you have some sort of overdraft protection which I would always recommend). But, if you’re going out this weekend to pick up the new Blu-Ray player take your credit card instead. It could save your butt if that player turns out to be a dud.

© 2006 BeancounterBlog.com.