debit card

4 Reasons Credit Is Safer Than Debit

Jason Steele — Mon, 13 Feb 2017 10:00:10 +0000

A debit and credit card may look the same, but they offer very different services. One takes money directly out of your bank account at the point of purchase. The other sends you a bill at the end of the month to pay for your transactions. If you're a Millennial who grew up during the Great Recession or someone else who's struggled with debt, a debit card may be your first choice for payment.

But overall, Americans increasingly prefer credit cards to debit cards. In 2016, credit cards for the first time surpassed debit cards as the favored payment method, according to the TSYS 2016 U.S. Consumer Payment Study. Forty percent of respondents chose credit cards as their most preferred payment type, compared to 35% who chose debit cards.

That makes sense from a security perspective. While debit cards have the advantage of preventing you from going into debt, they don't compare to credit cards when it comes to safety. Here's why.

More Types of Credit Card Transactions Are Protected by Law

Credit card users are much better protected by law. The Fair Credit Billing Act (FCBA) allows you to dispute not only fraudulent charges on your account, but also charges that are the result of merchant error. You can even dispute authorized charges and temporarily withhold payments — without harm to your credit score — if you are unsatisfied with the goods or services you purchased and the merchant won't refund your money. (The goods must be worth $50 or more and have been bought within 100 miles of your home in order to qualify for this protection.)

In contrast, debit cards are protected by the Electronic Fund Transfer Act, which doesn't cover disputes on authorized charges to your debit card, just unauthorized charges. (See also: Why Millennials Should Embrace Credit Cards)

Credit Cards Users Enjoy a More Generous Dispute Window

Legally, you've got more time to dispute a credit card charge than a debit card charge. The FCBA caps your liability at $50 as long as you dispute the transaction within 60 days of the date your billing statement was mailed to you. And there's no time limit for disputes if your credit card was included in a security breach.

With debit cards, your liability is also legally limited to $50, but only if you report the billing error within two business days of the transaction. The liability cap goes up to $500 if you report the mistake within 60 days, and you may not have any protections at all if you wait longer than that.

Fraudulent Credit Card Charges Don't Have an Immediate Impact

Should a criminal make an unauthorized charge or a vendor accidentally charge you the wrong amount on your debit card, your bank account will be immediately affected until you can resolve the problem. That's not so for a credit card. An accidental or fraudulent charge on your credit card will affect your available credit until you dispute it, but unlike a charge made on your debit card, it won't affect your ability to pay bills from your bank account. (See also: 7 Reasons I Use My Credit Card for Everything)

Credit Cards Protect Your Purchases Better Than Debit Cards

Credit cards often come with one or all of the following protective benefits on purchases.

Purchase Protection

If your purchase is stolen or accidentally damaged, this benefit can replace or repair it, or reimburse you for its cost. Policies vary, but some cover you for up to $10,000. (See also: How Credit Cards Protect Your Purchases From Damage or Theft)

Extended Warranty

Most credit cards offer an extended warranty policy that can add up to two years to the manufacturer's warranty of covered items. (See also: How Free Extended Warranty Works on Credit Cards)

Return Protection

There are times when you want to return a purchase, but the retailer will not accept it. Credit cards that offer a return protection policy may issue you a refund if you contact them within 90 days of the purchase.

It's extremely rare to find a debit card that offers you any of these benefits. (See also: Credit Cards vs. Debit Cards: A Comprehensive Comparison)

This article is from Jason Steele of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

Suze Orman's Approved Card Gets Mixed Reviews and Controversy

Ashley Jacobs — Fri, 13 Jan 2012 00:12:30 +0000

On Monday, personal finance expert Suze Orman launched her prepaid debit card, The Approved Card From Suze Orman. Suze is putting all her credibility behind this product launch. "I didn't just approve this card," said Suze. "I created it."

Feedback on the card has been mixed and even sparked a Twitter war between Suze and several top personal finance bloggers (more on this below).

Reviewing the Featues

Suze highlighted several features of the card on her website. Below is an analysis of each feature compiled from reviews from various media outlets and personal finance bloggers

The Fees are Competitive

According to Fox Business, compared to other checking account alternatives, The Approved Card offers competitive costs that best other celebrity prepaid cards. Cardholders pay a $3 purchase fee for the card and have to pay a $3 per month maintenance fee (which is waived for the first month). Using the card to make withdrawals from a Non-Allpoint ATM costs cardholders $2 per withdrawal and over the counter withdrawals cost cardholders $2 per transaction. For a list of all fees associated with The Approved Card, take a look at the Fee Schedule.

Suze has faced a lot of backlash due to all the fees associated with her card. As Jeremy Vohwinkle from Generation X Finance reminded his readers, Suze Orman is a personal finance expert who encourages people to get out of debt and avoid excessive fees. Throwing money towards debit card fees means consumers throw less money into eliminating their debt. This fact has raised some objections among personal finance experts and bloggers.

You Get Free TransUnion Credit Scores

For the first year, cardholders get access to their TransUnion Credit Scores for free.

ABC News pointed out that consumers can access their credit reports once a year for free by going to AnnualCreditReport.com. People can also access their credit reports from sites such as Credit Karma.

The Approved Card is Part of The Credit Project

Suze has embraced the idea that activity on debit cards should count towards a person's credit score. Since they aren't currently included in your credit report, Suze has set out on a mission to do that. Your activity on The Approved Card will be reported anonymously to TransUnion in an attempt to help Suze accomplish this goal. The Approved Card is the only card available that is part of this type of project.

Phil Taylor from PT Money highlighted the fact that The Approved Card will have no impact on cardholder's credit scores. He also made it clear that he believes The Credit Project is likely to fail due to the fact that prepaid and debit cards do not demonstrate someone's credit-worthiness.

You Can Establish an Emergency Fund

Cardholders have the ability to set up an emergency fund using their card. This way they can be prepared for unexpected expenses.

SmartMoney believes the emergency fund aspect of the card could be helpful, but also pointed out that there are currently no interest rates associated with the emergency card feature. Interest rates are supposed to be implemented later this year.

You Can Stay Debt Free

Since the card is a prepaid card, provided you are debt free when you get the card, you will not be able to spend more than what is in your account, making sure you don't go into debt.

MSNBC highlighted the fact that The Approved Card is similar to other prepaid cards in regards to keeping people from going into debt. In an interview with MSNBC, Gerri Detweiler from Credit.com made it clear that The Approved Card is "a very typical prepaid card."

The Card is FDIC Insured

Deposits up to $250,000 are insured by the FDIC. Bancorp Bank, the card issuer, is a member of the FDIC.

As MoneyCone pointed out, FDIC insurance is common among most banks. The fact that this card is FDIC insured doesn't really set it apart from other debit cards offered by other banks.

Cardholders get Free Identity Theft Protection from TrustID

Identity theft is a huge issue today but with The Approved Card, cardholders will have access to free identity theft protection through TrustID.

The New York Times highlighted Suze's statement that identity theft protection services tend to be costly. This service adds value to the card if cardholders had originally planned on purchasing identity theft protection.

The Personal Finance Blogger Community Reacts

One of the main responsibilities of personal finance bloggers is to report on product launches such as The Approved Card and give honest feedback.

A few of the top bloggers on the Wise1000 publicized their thoughts on the card and consequently had a run in with Suze Orman on Tuesday evening. (The Wise1000 is Wise Bread's authoritative listing of the top personal finance blogs.)

Here are a few of the highlights from their interactions with Suze:

Many personal finance bloggers were shocked by the dialogue from @SuzeOrmanShow. Phil Taylor of PT Money took the biggest hit in the scuffle. Phil is well-known throughout the personal finance blogging community. He was the organizer behind the personal finance blogging community's first ever Financial Blogger Conference and is in the process of planning FinCon 2012. Phil has been featured on numerous sites including MSNBC, U.S News & World Report, TurboTax, and Fox Business.

Phil's blog is the 26th most respected blog on our chart, and he is the 16th most active member of our blogger community. Here's what Phil had to say about the exchange:

First, regarding Suze: I like her and I respect her for her work. No doubt she's helped millions of people throughout her career. I consider her a teammate in helping people to improve their financial lives. She does it through her classes, books and TV shows. I try to do it through my little blog.

Second, I'm not one of these people who believes in inherently bad financial products. I actually like prepaid debit cards for certain situations. I even promote them on my site. I realize some people are "unbanked" for whatever reason and can't get a regular bank account, thus, the prepaid debit card comes into play. But only as a short-term solution until a bank account can be opened. The goal, in my opinion, should always be to get the unbanked folks off of fee-based products and into the mainstream banking arena.

So my review was never about Suze or prepaid cards in general. My review was about how the card is being marketed. It is being marketed as a long-term solution to the unbanked as well as to the middle class (wanting out of credit card debt and disillusioned by big banks) and to the 99% (who've had it with the fees). This attempt to promote the card amongst the banked is what really fired me up. Additionally, the fees on the card actually make it just on-par with the best prepaid debit cards already on the market. So the card is not exactly revolutionizing the prepaid debit card market for the unbanked.

As I said above, I like Suze, but I was obviously shocked and disappointed that she chose to respond to our tweets and blog post the way she did. She's since apologized, and I accept that.

The community response was awesome. I think the dismissive tone of Suze's tweets really rallied the community. It was as if she was telling us all that our opinions didn't matter. That obviously upset a lot of people.

Briana from 20 and Engaged "was completely disheartened" by the exchange but also felt that the fact that the pf blogger community supported each other during Suze's attack "showed loyalty and true camaraderie." (Briana is the top contributing member in our blogger community.)

As seen above, Suze did apologize for the dialogue. She maintains her own twitter account, so all tweets from @SuzeOrmanShow are written by Suze. Wise Bread reached out to Suze for additional comments on both her card and the Twitter exchange, but she declined to comment further at this time.

What do you think of Suze Orman's Approved Card? Will you sign up for it? And what about the Twitter feud? Share your thoughts with us in the comment section!

This article is from Ashley Jacobs of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

New Debit Card Rules

Julie Rains — Wed, 04 Aug 2010 16:53:48 +0000

Debit-card rules are changing. You won’t notice the difference if you keep a cushion in your checking account, maintain meticulous records of your balance and all pending transactions, and your bank never makes a mistake. Otherwise, pay attention.

Overdraft Opt-Out Is the New Default Mode

On August 15, 2010, the rules change. If you’d like your bank to authorize debit-card or ATM transactions even if you don’t have money in your checking account, then you’ll need to make arrangements ahead of time with your bank. That is, make a conscious decision to opt-in to an overdraft agreement. See information from the Federal Reserve on new overdraft rules for debit-card transactions. (The opt-in rule applied to new accounts opened on or after July 1, 2010 but will not apply to existing accounts until mid-August.)

Many banks are now touting the “convenience” of overdraft services and are helping customers to “avoid the embarrassment” of having a debit-card transaction declined. There can be hefty fees attached to these amenities so be forewarned.

First, check your bank’s website and then, talk to your banker if you decide you want to opt-in to overdraft services and fees, such as:

“Overdraft Privilege” with an overdraft fee of $34 per incident plus $5 per day up to 24 days if the account isn’t brought to a positive balance within 10 business days after the first overdraft incident.
“Overdraft Protection” with a transfer fee of $10 to move money from a savings accounts, line of credit, credit card, etc. linked to your checking account in order to cover the funds needed for a transaction.
“Extended Overdraft" an extra fee of $30-40 for having an overdrawn balance after transactions have been covered.

If you opt-in, note that the bank has your approval but is not required to authorize a payment if you don’t have the funds at the precise moment of the transaction. If your account is active and you generally have money in your account, then it’s likely but not guaranteed that the bank will process the transaction (that is, pay the merchant) on your behalf.

Before, Automatic Opt-In Meant Automatic Fees

Prior to recent federal legislation, banks could automatically enroll their debit-card customers in an overdraft protection program. So, when you paid a merchant with your debit card or withdrew funds from the ATM but didn’t have enough money in your checking account to cover the transaction, the bank might authorize the transaction anyway.

This arrangement sounds innocent, even protective. Some financial institutions, traditional banks and credit unions alike, referred to the procedure of authorizing a transaction even if the cardholder didn’t have the funds as a “courtesy.” This word implies a favor, a good turn offered freely by a friend, especially thoughtful acquaintance, or a stranger performing a random act of kindness, not a service provided for a fee.

By fronting money to its customers, banks allowed both essential and non-essential transactions to be completed. In some cases, perhaps when paying the toll-road fee on the way to the hospital’s emergency department at a time that you didn’t have a pre-paid pass, coins, cash, or a credit card, the bank's actions would be appreciated. Very often, though, customers would have preferred to learn immediately about the shortage and stopped the transaction rather than incur bank fees.

Complicating matters:

Because they hadn’t expressly approved of the overdraft coverage, customers didn’t realize that they had given banks the right to authorize charges; customers may have reasonably believed that transactions would be declined if funds weren't available.
Banks reserved the right to process debit-card transactions not as they were presented according to a traditional timeline (that is chronological order) but in an order that triggered a series of overdrafts and accompanying fees at $30-40 per incident. (See Will’s article on how banks manipulated debit-card transactions.)
On the other hand, some banks may have authorized transactions even if funds weren't available but refrained from charging overdraft fees if deposits cleared later in the day.
Just one round of overdraft fees could place even a savvy customer in a deep financial hole, which could then lead to a series of cash shortages and more fees.

Good News with Warning

Good news: you’ll avoid overdraft fees and banks are not charging fees if transaction amounts are less than $5 or $10 (check with your bank to find out its threshold).

Avoiding overdraft fees sounds great. What’s unclear is whether banks will charge some other type of fee, perhaps an electronic-decline fee or non-sufficient-funds fee rather than an overdraft fee if a debit-card transaction is declined. Some banks are saying explicitly that such transactions will be declined and no fee will be charged; others don’t address this issue. I mention this possibility after getting hit with a "low-activity" fee on a "no maintenance fee" account.

The advantage of the opt-out arrangement is that you’ll immediately find out about a low-balance situation and should avoid overdraft fees at the same time. You can then refrain from making more debit-card transactions, add money to your checking account, or straighten out any problems with deposits.

What’s Not Covered by the New Rules

The new opt-in rules cover everyday, nonrecurring debit-card transactions and ATM withdrawals. They don’t apply to:

Check payments
Recurring debit card transactions
Automatic bill pays
Online banking bill pay or transactions using your checking account number

How to Protect Yourself from Overdraft Fees

Carry cash. My mom and Philip both recommend carrying some cash for just-in-case situations.
SchwabMoneyWise recommends paying cash for rather than using plastic for transactions less than $10.

Sign up for bank alerts of low-balance or negative-balance situations.
Use your credit card, not debit card, for transactions.
Create a budget and track spending to make sure that you don't overdraw your account.
Note when deposits will be credited to your account, and challenge bankers to credit your account as soon as possible rather than holding funds for a few to several days.

Embrace the Negative

I like the the negativity of words like nonsufficient funds (NSF) that condemns those (even me, in college) who failed to have enough money in an account to cover a transaction and encourages us to set our financial paths straight. Whether you opt-in or opt-out of overdraft coverage, don’t be seduced by words like convenience and courtesy.

This article is from Julie Rains of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

10 Tips to Save You from an ATM Skimmer

Paul Michael — Wed, 07 Apr 2010 14:00:09 +0000

If you don’t yet know the term “skimmer,” put it in your vocabulary. The skimmer is becoming more and more widespread, and most of us will, sooner or later, come into contact with one. If you don’t have your wits about you, it could cost you a bunch of cash.

As technology gets more advanced, so do the crooks trying to take advantage of it. And, in turn, us. The ATM has always been a prime piece of real estate for thieves. You’re exposed, you’re handling money, and you have your back to the world. But it’s a dangerous game for criminals to play, as they too are exposed and risk being caught, or being seen.

These days, it’s far better to use those advances in technology to do the dirty work for them. The skimmer is the direct result of it.

A skimmer is usually composed of two sections. The first attaches to the card slot, usually covering it completely. The second is a camera, which can be very close to the card slot or some distance away, at the top of the ATM. The card reader records the electronic data from your ATM card, which the thief can use to make an exact copy of it. The camera is there to record your PIN. Whichever one the thief employs, they are not impossible to spot. In fact, some are downright clumsy. But, just like fake money, you need to be aware at all times.

Below is a picture of a typical skimming device. There are hundreds of different varieties out there, made to match different machines.

Photo courtesy of Brian Krebs. For more photos, check out these two additional posts, here and here, from Krebs on Security.

As you can see, it can be quite convincing. To be fair, some are fairly sketchy, others have been molded professionally and look very good. But they never look perfect (at least, not yet) and that’s something you have on your side. But what you also need is some basic, honest-to-goodness suspicion. Remember, this is your money and you should never take any ATM at face value. Here are some tips I’ve collected from various news sources, both local and national (CNN, ABC, NBC, FOX), and sites including Lifehacker, The Consumerist, Boing Boing, eHow, and Gothamist.

(What’s even more disturbing is that when I typed in ATM Skimmer, Google tried to finish the sentence with “for sale,” meaning an AWFUL LOT of people out there are trying to buy them. They’re available for as little as $2000, and I could buy one right now. Google also returned results on how to make an ATM skimmer, which I am not going to print here, obviously. But with the internet giving thieves access to all the information they’d ever need from the comfort of home, you need to double the guard.)

1. Trust your instincts.

If anything, anything at all, looks out of place on an ATM, don’t use it. If you see a wire poking out, or the plastic on the card reader doesn’t quite match, or there appears to be some unusual wear and tear around the card slot, walk away. It could be fine, but why take a risk?

2. Look for mirrors, leaflet holders or anything else around the ATM.

The machine should be free from anything like that, so add-ons are another huge red flag. They hide cameras behind these devices.

3. Guard your PIN carefully.

As most skimmers require two pieces of information from you, the PIN is something you can at least stop them from getting. You may seem a little paranoid to anyone waiting in line behind you, but who cares? Just cover your actions by cupping one hand over the numbers as your other hand enters them. It’s rudimentary but it works.

4. Take advantage of the debit card “cash back” feature.

When you’re running low on cash, and a grocery or convenience store will give you cash back if you pay for your purchase with a debit card. Simply hit the amount of cash you need. It’s free, saving you the $2-$3 ATM fee, and it’s safer.

5. Become a creature of habit and use the same ATM each time.

This won’t protect you from encountering a skimmer, but you’re much more likely to notice something fishy if you are familiar with the machine.

6. Look for ATMs with video surveillance.

These machines have extra security and this additional level of protection deters thieves from installing the skimming devices.

7. Beware of ATMs that are off the beaten track.

The thief will have more opportunity to install a skimmer on a machine that’s out of the way. If you can, use an ATM inside the branch — these are almost impossible to manipulate. The portable ATMs, like you find in gas stations, are also very easy to mess with. I stay away from them unless I have no alternatives.

8. Don’t be afraid to poke and prod the ATM.

If something looks odd, investigate. These skimming devices are designed to be removed easily an quickly. If the thief can take it off, so can you.

9. NEVER use an ATM if someone is offering to help you with it.

That may seem really obvious, but thieves can dress as technicians, bank tellers, or pose as another customer. Imagine an old lady asking for help, maybe asking if she can see how you use the machine so that she knows what to do. Or a guy in a very official uniform telling you the machine has just been cleaned, inspected, or refilled. These are all signs that you should walk away.

10. Finally, if you do suspect something, let the local branch, gas station, or store know.

It may be a false alarm, but you could prevent someone being ripped off who isn’t as vigilant as you are.

Snopes also has some great information on ATM skimmers. And The Consumerist offers the following pdf that outlines many more skimmers and the ways you can look out for them. I advise you all to read it and pass on the information in it, and this article.

Please, be careful, and if in doubt, walk away.

This article is from Paul Michael of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: