I had a debit card get lost/stolen a couple of months ago, and I nearly ran into serious problems as a result. My bank was excellent about refunding all of the money that was fraudulently spent and the fees that were charged, but in the meantime I had no money in my checking account to pay things like rent and student loans.

I was able to get money out of savings to cover the costs while I disputed the charges, but since my savings account is at a different bank than my checking account, that meant a lot of hassle. If my credit card had gotten stolen instead of my debit card, I would have been able to get the fraudulent charges taken off before the end of the statement period without having to worry about whether my automatic student loan payment was going to get deducted.

Anyway, when I requested my new debit card, I asked for a PIN-only card, without the VISA/MC part. I would rather risk opening myself up to the temptation of spending money I don't have (with a credit card) than give someone else the opportunity to spend money that I already have and need with my checking account debit card!

Thanks for looking into this Will. I am one of the cc holdouts and though I have a Visa check card (part of a promotion to raise money for charity), I have never used it. I thikn the federal protection you are referring to is the Fair Credit Billing Act. Back to my original topic, are there protections for Internet shopping? 

I use my debit card almost exclusively. I find I actually buy more if I'm cash-only because then I have all these ones and fives just waiting to be spent on little dumb things -- some candy here, a bottle of pop, some gum.

With the debit card, I stop and think -- do I really have enough money for this? Because if I don't, there'll be an overdraft fee and I know I can't afford a $30 bank charge plus whatever the business I'm buying from would charge.

I'd never use a credit card instead of a debit card, though! I'm just not disciplined enough for that. Even though I know it's not "free money," credit cards sort of feel like that to me. I don't really have to worry "will this purchase make my checking account bounce?"...even though, technically, I should. So I think it's just safer for me to use debit instead of credit OR cash.

Plus, when I use my debit card, my bank keeps track of it online which then I use Thrive along with it to keep track and see exactly where my money's going (I buy a LOT of food, I've found out). With cash, it goes down the drain and then I wonder, "What'd I spend that on?" and I have no idea what I spent it on and no way to find out.

If you ask me (which you didn't), it's all about strategy and discipline. First, I think debit cards are way too dangerous because they are a direct link into your cash reserves (as Ms Kyle demonstrated). Secondly, most credit cards nowadays offer "virtual" credit card numbers which can safely be used for online purchases. My debit card doesn't offer that feature.

My wife and I have been using a Citi Diamond Rewards card for several years now. We barely use our checking account other than for the occasional check that has to be written, and to pay off the Citi card.

Anything we can possibly pay with the Citi card - we do. And we've never paid interest yet, it gets paid off each month. We basically treat it like a debit card. And the bonus is, at the end of every year we have $500-600 worth of reward points we use to request gift cards that we give to our kids for Christmas. :-)

Proper use of credit cards is a financial strategy. But if you can't be disciplined with them, and not put more on the card than you have cash in the bank, I recommend staying away.

Your 1% or 3% cash back "reward" is not free money. Generally, merchants pay higher fees to the credit card companies when reward CCs are used. These fees are passed on to the consumer as higher prices. We would all be better off if reward cards were converted to simple no-fee cards, and retailers passed on savings to their customers. Unfortunately, CC companies have latched onto reward cards as a very successful marketing gimmick.

@ Dave # 11 --

Challenge accepted:

Costco CC processing service charges merchants more for reward cards than non reward cards.

Also - I googled "credit card processing rates" and found a number of sites that described the different CC processing rate tiers used by CC companies. Enough to convince me (YMMV) that maybe not all banks charged the differential fees, but some do.

I posted a video comparison analysis about debit card, credit card and charge card at http://credit-card-videos.blogspot.com/2008/12/credit-card-vs-debit-card...

I use my Debit Card almost entirely, but I almost immediately mark the transaction into my checkbook and keep the receipts in my wallet in order to do so. I balance my checkbook and then balance that against my Money account which is balanced against my bank account. The only time I ran into problems was online when I changed my mind immediately after signing up at a Google Success site. It turns out that the people signed me up anyway and then started taking out more. After playing refund pingpong, I finally went to my bank and they just reissued my card. I did not know how dependent I have become on it, from Gasoline to grocery shopping etc...But, the times I have run into trouble have been when I have lost a receipt or not recorded a transaction which have been seldom now that I am no longer working 2 jobs.

re: keeping a minimum in my checking account,

these days the minimum I keep in there is around $1000. At other times it has been lower, but I found that any time I had less than $500 in my checking account, things started to get sketchy and I had to worry about timing deposits and payments.

Along with budgeting my last month's income (already deposited) for this month's spending, this means I will have around $2500, or one month's income (yeah i know I don't have a lot of income) plus $1000 in my checking account at the peak time of the month (near the first), and it rarely drops below $1000 at any time during a month.

Not only is there no risk for overdrafts doing this, I only have to go to the bank once a month to deposit all of my checks for the month and withdraw any cash I need for the coming month. It's almost like not having to think about banking.

Have a look at my blog post called Experts Suggest That Credit Cards Are A Better Option For Security Than Debit Cards. In it there are 2 videos of experts discussing the matter of credit skimming as well as several options for protecting your information. One video was from the Today show on NBC and the other was from an episode of On the Money from CNBC, so they are both from reputable sources not some internet junk or propaganda as much of the "info" people like to pass on is..

Regarding merchant charging more for rewards cards: this may make sense for some store branded cards but it doesn't make any sense at all for Visa/MC bank-issued cards.

The reason it doesn't make sense is that with Visa and Master card cards (both credit cards and debit cards used as credit), Visa and Master Card companies get money from merchant transactions. Rewards, on the other hand, are paid by banks that issued the card. Interest on credit cards as well as all late or other fees is charged by banks. If someone defaults on his or her debt, the bank will lose money, but Visa and Master Card company wouldn't care. So if you have, for example, Chase or Citi Visa card and you use it in a store, the merchant will pay a certain percentage - 2% or 3% to Visa. The rewards, however, are given to you by Chase or Citi. Visa will get its money regardless of whether you use Visa credit card or Visa debit card (used as credit).

Discover and AmEx are different in that they both get money from merchants and are involved in lending. I don't know if they charge merchants more for reward cards. I doubt it as these fees are pretty fixed at 2 or 3%, but I wouldn't bet my considerable life savings on it.

Additionally, since merchants pay a fee if you use a debit card (as credit) as well as credit, merchant fees is hardly the reason to use credit card.

On another subject I don't see this whole "if I use debit card I use real money" as opposed to credit. First of all, anybody who learned to always repay one debt's in childhood should understand that he or she spends real money with credit card too. Second, most credit cards offer "automatic payment in full" option. If you sign up for automatic payment in full, you know that your full balance will be deducted from your bank account on a due date. In this case, the only difference when the money are taken from your account is timing. But with credit cards, the money are deducted later. During this extra float time, your money are in a bank spending money.

I agree with Dave M. For those of us who a) always pay our balances in full b) always think before buying anything, there is no reason at all not to take advantage of rewards and a little extra interest earned while our money are in the bank.