Consumer Watch: Pros and cons of using debit vs. credit cards when shopping

Consumer Watch: Pros and cons of using debit vs. credit cards when shopping

March 9th, 2014 by Ellen Phillips in Business Diary

Ellen Phillips

Tax Tip

Check out Publication 17, Your Federal Income Tax, on the IRS website. It's a complete tax resource that includes information such as whether you need to file or how to choose your filing status.

A couple of weeks ago, I received a notice from Target reminding me of my free one-year Experian offer that allows that credit reporting company to keep an eye on and report if anything funny is going on with my purchases. (The notice is, of course, thanks to Target's recent data breaching horrors.)

The irony of the situation is I never pay with a debit card, rarely shop at Target, and only last fall did I take out a "REDcard" to save myself time. (Do as I say and not as I do ... please.)

While I have reported before on the perils of using debit cards (or, in my case, the REDcard) to shop, it bears repeating that we should leave our debit cards at home when we set out for the mall, among other places.

Reported by The Week, among other periodicals, we tend to forget that credit and debit cards are NOT created equal. Credit cards are covered by the Truth in Lending Act, which places the maximum amount for fraudulent purchases at $50, plus offers the consumer dispute protection and fair credit billing to allow you to stop payment. Too bad that debit cards aren't so generous; the Electronic Funds Transfer Act protects you from liability only if you immediately report the card's loss or theft to your bank and before it's been used. It gets worse, too: after three days, your liability can jump to $500 and after 60 days, the sky's the limit.

The scenario doesn't stop here, either. Fraudulent charges on a credit card can be reversed in two weeks or even less, while two weeks is the norm to ensure those "lost" funds are reinstated to the debit card account. And that debit card PIN? It's not just scary bedtime stories; any type of "terminal" is more likely to be outfitted with a skimming device to steal your PIN and any other personal information, including ATMs, gas pumps, restaurant employees, and so forth. Yikes!

So how can we protect ourselves and still continue to purchase with a debit card? At the risk of sounding paranoid (which readers already know is my middle name), monitor your balances every single day. Check with your bank to see what protection policies are available. If you receive any message that appears even the slightest bit suspicious, call the company directly - but only after googling the contact info yourself. Don't assume that one, single iota of info in a suspected phishing email is correct. In fact, never assume anything. Period.

Ellen Phillips is a retired English teacher who has written two consumer books. Email her at consumer watch@timesfreepress.com.