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Credit vs. debit: Which is safer to use?

Posted August 3, 2022  |   Topics: Wallet Wisdom

If you use your debit card for most of your purchases, you may want to consider using a credit card instead. Fraud is on the rise and becoming more sophisticated. According to the Federal Trade Commission, Americans lost $5.8 billion to fraud in 2021, up 70% from 2020. Protecting your money is more important than ever, and, in most cases, credit cards provide more fraud protection benefits compared to debit cards.

The liability protection credit cards are legally required to provide is more significant than debit cards. Under the Fair Credit Billing Act, the maximum amount in fraudulent credit card transactions you can be held responsible for is $50 — and at LMCU, our Visa credit cards have zero-liability fraud protection.

Debit card liability under the Electronic Funds Transfer Act is more complicated, no matter the financial institution. Your liability is $0 if you report the debit card lost or stolen before any fraud occurs. However, if fraud occurs before you’re aware of it, your liability depends on how much time passes between the fraudulent activity and your reporting of it. For example, if it’s beyond two days but less than 60, you can be responsible for up to $500. If it’s more than 60 business days, you could be held responsible for all unauthorized charges. Consider checking your statements regularly and setting up eAlerts in LMCU Online Banking so you can catch fraudulent purchases as quickly as possible.

Another important factor to consider is credit cards use your established line of credit instead of the actual funds held in your credit union or bank account. This allows the credit card company to sort out fraud without directly impacting your money, and your credit score will not be affected. With debit cards, fraudsters can drain the money from your checking or savings accounts and cause significant damage. Even if you catch it quickly and aren’t responsible for the full amount of fraudulent charges, you will be out the amount that was stolen from you until the fraud is sorted out, and you may miss bill payments as you try to get your money back. Missing bill payments can incur fees and potentially damage your credit score.

Does this mean that you should use your credit card for everything instead of your debit? If you know you can trust yourself to use your credit card like cash — paying it off in full each month, tracking your purchases, and not spending more than you have — then using a credit card whenever you can has benefits. Used responsibly, credit cards can also be a great budgeting tool.

If you can’t use your credit card for all your purchases, consider only using it for riskier ones such as online shopping or paying at the pump (card skimmers can still be an issue). It can also be beneficial to use a credit card for larger purchases, like appliances, because your card may provide extended warranties and return policies.

Don’t have a credit card, or looking for a better rate and more rewards? Consider applying for our Max Rewards Visa. You’ll get the peace of mind that comes with zero liability while earning 3% cash back on gas, 2% at grocery stores and restaurants, and 1% on everything else.*


*Percentage cash back based on per dollar spent. 3% on gas capped at $500 per month and then 1% after maximum is reached. 2% on groceries is unlimited; 2% on restaurants unlimited (Max Rewards Visa Signature card only); 1% on everything else is unlimited.

Topics: Wallet Wisdom