Why I’m Terrified of Debit Cards
Debit cards are often considered the financially stable alternative to credit cards, but they’re directly tied to your bank account. Debit card stolen = bank account drained. Despite their reputation, credit cards provide many protections and benefits that debit cards don’t.
In the United States there are specific laws that dictate your liability if your payment card is lost or stolen. These laws are the Fair Credit Billing Act (FCBA) and the Electronic Fund Transfer Act (EFTA).
Your maximum liability for fraud with a credit card is $50. And you won’t be liable at all if only the number is stolen, and not the card itself.
Debit cards are a different story. If you don’t report the loss or theft within two days, you are liable for up to $500. If you don’t report it within 60 days of receiving your statement, your liability is unlimited. You may never get your money back at all.
Thieves can directly spend your money:
Increased liability isn’t the only thing to worry about. Because debit cards are tied to your bank account, a thief with your card has direct access to your money. Except for the limits outlined in the laws above, your bank has no immediate financial incentive to help get your money back. Fraudulent transactions may not be reversed until the bank completes their investigation. And let’s face it, banks—which typically close at 5 PM and aren’t open on weekends—don’t exactly have a reputation for being fast. This means it could be days to weeks before the transactions are reversed.
Credit cards on the other hand have some of the most effective fraud prevention measures in the world. Just look at the incentive. When you swipe a credit card, it’s not your money being spent. The bank and processor for your card have a direct financial incentive to investigate and reverse fraudulent transactions. In fact, all major American credit card companies have 24/7 customer service hotlines, and will typically reverse fraudulent charges immediately.
Lack of perks and rewards:
It’s rare to find a debit card with cash back or a sign-up bonus. It’s almost impossible to find a debit card with a rewards program, insurance on purchases, or other perks. All of these benefits are common with credit cards. Many of them are practically standard, even for cards with no annual fee. Cash back, one of the most common credit card perks, is basically a tax on debit and cash purchases. Every time you buy with cash or a debit card, remember that you could have gotten a small discount by using a credit card instead.
I personally limit my debit card usage as much as possible. With fewer federal protections, backwards incentives to prevent fraud, and no perks, debit cards just aren’t worthwhile to me. If my card is lost or stolen, I prefer the peace of mind that credit cards provide. The main reason debit cards are considered “safer” is that they prevent you from spending money you don’t have. But as shown here, that “safety” comes at a price.