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Right now my spouse and I are using debit cards, connected to checking accounts, for our "extras". There's never very much in either of the checking accounts. I wonder if we'll be more secure switching to credit cards (and paying them off every month). Is this the case?

Edit: I intentionally keep little money in the checking accounts; I didn't mean to imply it's all the money I have in the world. The rest I keep in investments, money market, etc.

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    Is this because you purposefully transfer money in/out to keep a low balance? – Hart CO Jul 19 '18 at 19:58
  • @HartCO - Yes, I purposely keep a relatively low balance in these accounts – horse hair Jul 20 '18 at 9:41
  • @Fattie - I may have not been clear enough with my question. I have most money in other accounts. I pay off my credit card monthly. I keep a small amount in checking. – horse hair Jul 20 '18 at 12:20
  • This is almost exactly what I do (except for sweeping unused money out of checking at EOM. – RonJohn Jul 25 '18 at 4:27
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You have the same fraud protection with a debit card as a credit card by same processor. However, the Fair Credit Billing Act limits your liability to $50 on a stolen credit card, while you could be liable for up to $500 on a stolen debit card if you don't report it within 2-days of discovering it missing. But many debit cards have the same $50 limit (and even that is frequently waived).

There may be more hassle with a debit card as refunds can take longer than credit cards, and it's your actual money tied up vs a credit balance.

Other down-sides of debit cards are that due to credit card rewards you're effectively paying an extra ~1-2% on all purchases if not using a rewards credit card and debit card usage doesn't help your credit score.

On the other hand, a debit card limits you to spending what you have, many people spend more with credit cards than they would have otherwise, which quickly negates the benefits. If you keep a good budget and aren't worried about falling into this trap, then credit cards offer clear advantages.

Reference: A Nolo article, Your Liability for Unauthorized Credit and Debit Card Charges

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    For people living hand-to-mouth with empty bank accounts, that "delayed refund" problem can cause a cataclysmic cash-flow problem with unforeseen consequences, such as a Sophie's Choice between getting evicted or getting a ChexSystems ban from having bank accounts. – Harper - Reinstate Monica Jul 19 '18 at 22:27
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    @Harper That's a good point, I was assuming/hoping the low-balance was deliberate so didn't really emphasize that bit, but glad you did. – Hart CO Jul 19 '18 at 23:00
  • The danger of running up debt and destroying your life, utterly overwhelms the totally trivial advantages of a credit card. one might as well discuss the advantages of "not wearing a seat belt". Sure, there are some advantages to "not wearing a seat belt". – Fattie Jul 20 '18 at 1:30
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    @Fattie That's like saying the danger of becoming an alcoholic and destroying your life utterly overwhelms the totally trivial advantages of alcohol. Many people can drink responsibly and are in no danger of becoming alcoholic, many people use credit cards responsibly and are in no danger of running up debt. – Hart CO Jul 20 '18 at 1:45
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    This debate over credit cards causing a plague of debt and destroying your life is sophomoric. Irresponsible people will always get into difficulty whether it's credit cards, alcohol, gambling, drugs, ad nauseum. – Bob Baerker Jul 20 '18 at 15:28
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Yes, more recourse with false charges with credit cards than with debit cards. With debit cards, potential to clean out your entire account. Better consumer credit rating improvement (assuming you actually pay the bill).

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    By "clean out your entire account" you mean the balance in the account, right? Because we don't leave much in there. What I'm more worried about is liability beyond the balance. – horse hair Jul 19 '18 at 18:53
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    Yes, Im looking for the article I just read on this a few months back. It was from a real expert. And it was crystal clear, better to use credit cards. Will post if /when I find the source. – user330994 Jul 19 '18 at 18:57
  • @horsehair You should be. The bank solely decides whether to honor a debit that overdrafts your account. Not least, they get to charge you $37. This can be for thousands of dollars if the bank wants to "loan" you that much. This is not a loan; you must quickly cover that amount or get an interbank blacklist (ChexSystems). If the charge was fraudulent, you can file a claim and maybe get your money back months later. Why are you using debit cards again? – Harper - Reinstate Monica Jul 19 '18 at 22:24
  • You would need to find out how your bank handles overdrafts. If your bank will automatically withdraw from a linked savings account to cover a potential overdraft, you can lose it all. – pboss3010 Jul 20 '18 at 12:33
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The utmost security would be obtained by using a virtual credit card. Last I knew, Bank of America and CitiBank are the only ones who offer this feature.

It's a randomly generated temporary credit card number designed to protect your traditional credit card information when shopping online. Each time you use it, the payment is made with unique information. Your credit card information is not revealed to merchant and therefore, it can't be stolen.

Usage is billed to your real credit card with the bank. Each number can only be used by one merchant so it's void elsewhere. You can set dollar and time limits on your Virtual Account Numbers and you can also close them at any time. And it's free. The only hassle is that it takes a few minutes to set one up.

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  • Capital One also offers the "virtual" credit card number, at least on some accounts - I happened to see the notation earlier today. – Istanari Jul 19 '18 at 22:58
  • Looks like it's catching on, albeit slowly. IMO, that's a good thing. – Bob Baerker Jul 19 '18 at 23:13
  • Doesn't help us when we go to the (physical) stores, though. – horse hair Jul 20 '18 at 9:53
  • @horsehair - That's what the chip cards are for. Of course, as long as the magstripe is still accepted, there's still a vulnerability. And, of course, since the US didn't shift to chip-and-pin, we're still less secure even with chip carsd. – Istanari Jul 20 '18 at 15:03
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    It's called a "token". They're widely used; mobile wallets (Google Wallet, Apple Pay, Samsung Pay) use them. – Acccumulation Jul 24 '18 at 19:37

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