Most experts suggest using credit cards for your online purchases, especially if you’re choosing between credit and debit. While the risk of fraud is always lurking in the background, credit cards come with additional protections that debit cards simply lack. Here’s what we mean: [This article was first published on The Simple Dollar in 2020. It was updated in March 2022.] Also: The most exclusive credit cards If someone does get your credit card number and makes a purchase online, chances are good you won’t be held liable for a single cent of it if you report it in a timely manner. Sadly, the same can’t be said about purchases made with debit cards at all – more on that in a minute. However, as noted above, most credit cards offer zero fraud liability, meaning you won’t be on the hook for a penny. Most credit card issuers will put the fraudulent charge on hold while they conduct an investigation so that you won’t be out the money in the interim, either. Debit cards, though, are a different story. Since the money you spend comes out of your bank account, you may have to wait days or weeks to get a refund for a fraudulent transaction made with your card. Further, your liability jumps to $500 if you don’t catch the fraudulent transaction within two business days – and you could even have your bank account drained with no recourse after that. Here’s how the Federal Trade Commission words it: If a fraudulent transaction made with debit goes unreported for more than 60 days after your statement is sent, you could be on the hook for “all the money taken from your ATM/debit card account, and possibly more; for example, money in accounts linked to your debit account.” Also: The best starter credit cards for no credit Use a credit card for online purchases: It will offer more consumer protections than a debit card does in the event of fraud. “When you pay with your credit card, you may have the ability to withhold payment or dispute a charge if there is an issue with your purchase,” notes Discover on their blog. Most of the time, your card issuer will even take care of the investigation details, too. If you receive something funny or damaged in the mail, you just need to pick up the phone and call them. However, the situation may not be resolved so smoothly if you made the purchase with a debit card instead. “When you pay with your debit card, the funds are immediately withdrawn from your account, leaving you without the cash until you can settle the dispute with the merchant on your own,” says Discover. And, even if your bank takes up your cause, you’ll have the burden of proof on your shoulders. Also: How to build good business credit Remember, debit cards don’t help you build credit, nor do they report your account activity to the three major credit bureaus – Experian, Equifax, and TransUnion. If you actually want to improve your credit, using the credit you already have responsibly might be the best way.
