How to Compare Debit Credit Card Consumer Protection

Know the rules for debit and credit cards.

Credit cards and debit cards can both provide great convenience, but the consumer protections they offer can be quite different. Before you whip out your credit or debit card to make your next purchase, take the time to ask your bank some questions. Learning about the protections your card offers, and the bank's policy on fraudulent use, is critical.

Lost and Stolen Cards

You naturally want to keep your debit card with you at all times. If you do discover your debit or credit card missing, you need to notify the issuer as soon as possible. The consumer protections for fraudulent use of a credit and debit card differ. According to the Federal Trade Commission, consumers who report their cards lost or stolen have a maximum liability of $50. Debit card holders have the same liability limit if they report the card loss within two days. That liability limit goes up to $500 for consumers who fail to report the loss or theft of their debit cards within that two-day time frame.

Purchase Protection

One of the biggest benefits of paying with a credit card is that most cards provide some sort of consumer protection. If the product or service you buy with the credit card turns out to be defective or does not perform as advertised, you can contact the credit card issuer and request a charge back. The charge in question will be removed from your statement while the credit card issuer investigates the claim and makes a determination. Some debit cards provide similar protections, but many do not. If consumer protection is important, it is best to stick with credit cards.

Overdraft Protection

One of the dangers of debit cards is that you will overdraw your account. Unless you keep careful track of your spending and record every debit card purchase in your checkbook, you could lose track of your balance and fall victim to overdraft fees. If you plan to use your debit card for everyday purchases, it is important to review the terms and conditions of the bank's overdraft policy, including all overdraft fees and charges.

Blocking Cards

You need to be aware that, when you buy with plastic, the merchant might place a block on the card for the amount they expect the purchase to cost. This card blocking is most common at gas stations, since the vendor cannot tell ahead of time how much fuel you are going to buy. This card blocking can be a problem with credit cards if you are at or near your credit limit, since it could trigger an over the limit fee. If you use a debit card and a block is placed, you could face an overdraft charge if your balance is too low.

References

• CNN Money: Debunking Debit Card Rewards
• Bank of America: Debit and Credit Cards
• Federal Trade Commission: Credit and Debit Cards
• Federal Trade Commission: Card Blocking