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I have a credit card and a debit card. I could use both to pay online. Credit card is only a bit less convenient since I have to transfer the money back in the credit card account later.

Is it safer to pay with a credit card though? I'm thinking that credit card money is bank's money, whereas debit card money is my money. So in case of fraud, my money would be lost (if paying by debit card), but in the case of credit card the bank would lose.

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    Here in the UK, we can set our credit cards to be paid off automatically using "Direct Debit". AFAIK, all credit cards offer this service. This prevents credit cards being less convenient. You can select to pay the bill in full, pay the minimum, or pay a fixed amount. – rjmunro Jun 21 '11 at 10:46
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    It's probably easier to buy stuff, if you're not thinking of it as your money. – Brian Maltzan Nov 11 '11 at 21:54
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Credit card, without a doubt.

The reason is dispute resolution. If you dispute a charge on debit card - the money has left your account already, and if the dispute was accepted - you'll get it back. If. Eventually. In the mean time your overdraft will be missing $$$.

For credit cards, you can catch a fraud action before the money actually leaves your pocket and dispute it then. In this case the charge is set aside, and you will only be required to actually pay if the dispute is rejected. I.e.: The money stays in your pocket, until the business proves that the charge is legit.

In both cases, if the dispute is justified (i.e.: there was indeed a fraud) neither you nor the bank will lose money at the bottom line, it's just who's got the money during the dispute resolution process (which may be lengthy) that matters.

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    +1, its a very important point. Quite a few time I was forced to burn my fingers during the dispute resolution as one is out of funds on the debit card. Even times when during online transaction there is a time out error and you try couple of time. On debit card you get hit multiple times and are debited. however on Credit card, there is no issue. – Dheer Jun 20 '11 at 8:56
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    From your explanation, it sounds like credit cards are preferred for any payment, not just online (from a fraud defense perspective). Right? – ibz Jun 20 '11 at 10:06
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    @ionut bizau yes, a CC is going to give you the better fraud protection online and in real world. My own practice is to only use debit card for local small purchases; lunches, movies, etc. Any big purchases or traveling I use the CC. Plus mine earns points so it's worth the small effort to use the CC and then pay the CC bill to get free travel and such. – Alan Barber Jun 20 '11 at 12:56
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    @ionut - definitely, credit cards are better than debit cards in any way. I don't recall ever using my debit card for shopping, they're used solely for ATM transactions (actual ATM's - cash, deposits, statements, etc, not ATM-like pin transactions). – littleadv Jun 20 '11 at 17:01
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    I use my DC 95% of the time for everything, including online shopping. Have never had an issue with it yet. Even had some fraud and disputed challenges and it never hit my account so I never lost the money. I think the bank is more proactive on security for that than for CC. Your situation might be different though. – Valien Feb 11 '13 at 19:37
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I completely agree with @littleadv in favor of using the credit card and dispute resolution process, but I believe there are more important details here related to consumer protection.

Since 1968, US citizens are protected from credit card fraud, limiting the out-of-pocket loss to $50 if your card is lost, stolen, or otherwise used without your permission. That means the bank can't make you pay more than $50 if you report unauthorized activity--and, nicely, many credit cards these days go ahead and waive the $50 too, so you might not have to pay anything (other than the necessary time and phone calls).

Of course, many banks offer a $50 cap or no fees at all for fraudulent charges--my bank once happily resolved some bad charges for me at no loss to me--but banks are under no obligation to shield debit card customers from fraud. If you read the fine print on your debit card account agreement you may find some vague promises to resolve your dispute, but probably nothing saying you cannot be held liable (the bank is not going to lose money on you if they are unable to reverse the charges!).

Now a personal story: I once had my credit card used to buy $3,000 in stereo equipment, at a store I had never heard of in a state I have never visited. The bank notified me of the surprising charges, and I was immediately able to begin the fraud report--but it took months of calls before the case was accepted and the charges reversed. So, yes, there was no money out of my pocket, but I was completely unable to use the credit card, and every month they kept on piling on more finance fees and late-payment charges and such, and I would have to call them again and explain again that the charges were disputed... Finally, after about 8 months in total, they accepted the fraud report and reversed all the charges.

Lastly, I want to mention one more important tool for preventing or limiting loss from online purchases: "disposable", one-time-use credit card numbers. At least a few credit card providers (Citibank, Bank of America, Discover) offer you the option, on their websites, to generate a credit card number that charges your account, but under the limits you specify, including a maximum amount and expiration date. With one of these disposable numbers, you can pay for a single purchase and be confident that, even if the number were stolen in-transit or the merchant a fraud, they don't have your actual credit card number, and they can never charge you again.

I have not yet seen this option for debit card customers, but there must be some banks that offer it, since it saves them a lot of time and trouble in pursuing defrauders.

So, in short:

  • If you pay with a credit card number you will not ever have to pay more than $50 for fraudulent charges.

  • Even better, you may be able to use a disposable/one-time-use credit card number to further limit the chances that your credit is misused.

Here's to happy--and safe--consumering!

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    The suggestion to use a disposable number is an excellent one if you are shopping online with some merchant that you don't have a track record with like some random guy in china selling stuff on ebay or something. I wouldn't worry about it with folks like Amazon or Newegg, but for someone you are unsure of, it's a nice bit of extra protection – Chuck van der Linden Jun 20 '11 at 18:07
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    Good point--getting the disposable numbers is a bit tedious, and I agree that it's probably not worth the trouble for large, well-established (and hopefully well-secured) retails... Myself, I only use them for the "questionable" ones (hello SlickDeals!). – ewall Jun 20 '11 at 19:23
  • A couple years ago, Discover stopped providing the disposable number service. mybanktracker.com/news/2014/01/08/… – user2023861 May 12 '17 at 15:31
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One more thing to favor the card. Extended warranty, or damage coverage. An iPad, if dropped on a hard surface, stands a good chance of breaking. Apple isn't going to cover that, as it's not a defect. Many credit cards offer free coverage for breakage of this type as well as doubling the warranty up to a year. This second year of coverage is worth about 10% of the item cost.

To be clear, I'm talking about running the expense through a card and paying in full, some call it credit no different than those who carry a balance month to month and pay 18% interest. I believe if I have the money to spend on an item, and use the card to get that coverage along with the benefits others posted, it's a convenience, nothing more. Some people who use certain budgeting methods like to set up a payment each week so the bill comes in close to zero. Whatever works.

  • This depends on which card you have, so isn't a direct argument for credit cards over debit cards, but it's worth looking for this kind of thing when you apply for your card. – rjmunro Jun 21 '11 at 10:50
  • Agreed, but I don't know any debit card offering this coverage, and of my 4 credit cards, 3 do. I agree, it's not 100%. – JoeTaxpayer Jun 21 '11 at 11:02
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I use another solution: debit card with an account kept empty most of the time and another account in the same bank without any card. I keep the money on the second card-less account, and when I want to buy something, I instantly transfer the appropriate amount to the account with the card and pay.

That way money is on the account tied to a debit card only for a minute before payment, and normally it is empty - so even if someone would try to fraudulently use my card number - I don't care - the transaction will be rejected.

I think its the perfect solution - no fraud possible, and I don't have to worry about possibly having to bother calling my bank and requesting a chargeback, which is stressful and a waste of time and harmful to peace of mind (what if they refuse the chargeback)?

I prefer to spend a minute before each transaction to transfer the money between the two accounts, and that time is not a waste, because I use it to reconsider the purchase - which prevents impulse-buying.

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    How is constantly moving money between accounts less troublesome than once in X amount of months reporting a fraud? I must admit, that I disputed a fraudulent charge (i.e.: a charge I didn't make myself) once in the last 5 years. How is your system making my life any easier? – littleadv Nov 10 '11 at 4:53
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    It is less troublesome because its spending a minuscule amount of stress-less time at a moment that is both predictable and convenient for me (just before making a purchase) instead of some stressful phone-time at an unpredictable moment in the future, when it can be inconvenient for me, I might not be in the mood and have more important things to worry about and end up not getting the charge-back in time. And risk having the problem occupy my mind for a month until the chargeback is resolved. – miernik Nov 10 '11 at 6:01
  • I do the exactly the same. @miernik - your website seems to be down, can you try to reach me? Just checked and my address is fine... Thanks! [sorry for OT] – Mars Robertson Mar 30 '13 at 16:36
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In the UK it is almost always better to purchase with a credit card for transactions above £100 but below £30,000. This is due to Section 75 of the Consumer Credit Act 1974 which makes your credit card company jointly liable if something goes wrong.

In other words, if you buy something worth £1000 with your credit card, the company fails to deliver for any reason and you cannot get a refund from them directly, you are entitled to make a claim from your credit card company for the full amount.

0

Nowadays, some banks in some countries offer things like temporary virtual cards for online payments. They are issued either free of charge or at a negligible charge, immediately, via bank's web interface (access to which might either be free or not, this varies). You get a separate account for the newly-issued "card" (the "card" being just a set of numbers), you transfer some money there (same web-interface), you use it to make payment(s), you leave $0 on that "card" and within a day or a month, it expires. Somewhat convenient and your possible loss is limited tightly. Check if your local banks offer this kind of service.

  • Exactly that is the case in Portugal, they call it MB Net. It is so efficient. Free Virtual Debit Card – William Kinaan Sep 25 '16 at 7:53

protected by Chris W. Rea Nov 13 '16 at 0:14

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