Do Not Use a Debit Card on Internet
November 22, 2008
Identity theft is a growing problem. If you take a few steps to protect your identity, you can alleviate some of the risks. One step is to avoid giving out personal information to strangers. As you know from reading my materials on this website, I advocate being a cash person. Pay for all your items with cash. However, the best method of payment for goods purchased over the internet is a credit card. There are several reasons for this.
First, a debit card is tied to your checking account. If someone steals your debit card information, they can wipe out your cash in your checking account. If someone steals you credit card information, they can rack up debt for you. Both of these situations are very bad, but it is much easier to deal with fraudulent debt than fraudulent loss of cash.
Second, the credit card companies monitor activity on your credit cards, whereas the bank does not monitor activity on your debit cards. If someone steals your credit card number and goes on a spending spree, the credit card company will step in and cancel the card. This will not happen with a debit card until all of the money in the account is gone.
Third, under the Fair Credit Billing Act, you are only liable for $50.00 in fraudulent charges, and it is fairly easy to dispute any fraudulent charges on the account. The process for disputing fraudulent charges on a debit card are not as easy, and until a credit is made, you are without cash.
This is one of those rare, and I mean rare, circumstances where I recommend using a credit card. All of the other rules still apply. Pay it off every month. Keep a card with a low credit limit, no annual fees, and a grace period of one billing cycle. This way you get all of the benefits with none of the headaches. For more information on the proper use of credit, visit Legal Credit Cures.
December 9, 2008 at 8:53 pm
A bank in our area has free checking accounts. You can open a 2nd free checking account with an amount of money you want to use for the Internet-example $100.00 or $200.00. With this account you get a Debit card with Mastercharge logo. You do not need to buy checks for this 2nd account. Only use it for the Internet. There are no fees. You just have to use the Debit card in 6 month periods to keep the card active and you only need to deposit $1.00 per year so they know the account is still active. If your bank has free checking, this is a way to use a debit card without the risk of someone draining your regular checking account. The worst they can do is get the small amount of money you have in account for Internet use. If you buy small items like DVD’s, you can keep $100.00 in account for payment and add to account when it is near 0 balance. We don’t have any debit cards with our regular accounts so it is easy to keep accounts seperate.
December 9, 2008 at 9:20 pm
It is good to hear that a bank is doing that. I still think the protections offered by a credit card are superior. You just have to be disciplined enough to pay the credit card every month. I understand that can be a problem for some consumers so the restricted debit card may be a better option for some people.