Credit or debit?

[Q.E.D]

@A.R. Cane

While contractural plans differ, I think you’ll find that your liability can be much greater w/ the loss/misuse of a debit card.

I have zero liability, provided I notify the bank (Wachovia) within 30 days. However, it appears that you’re largely correct, as far as Federal law goes. From the FTC website:

ATM or Debit Card Loss or Fraudulent Transfers (EFTA). Your liability under federal law for unauthorized use of your ATM or debit card depends on how quickly you report the loss. If you report an ATM or debit card missing before it’s used without your permission, the EFTA says the card issuer cannot hold you responsible for any unauthorized transfers. If unauthorized use occurs before you report it, your liability under federal law depends on how quickly you report the loss.

For example, if you report the loss within two business days after you realize your card is missing, you will not be responsible for more than $50 for unauthorized use. However, if you don’t report the loss within two business days after you discover the loss, you could lose up to $500 because of an unauthorized transfer. You also risk unlimited loss if you fail to report an unauthorized transfer within 60 days after your bank statement containing unauthorized use is mailed to you. That means you could lose all the money in your bank account and the unused portion of your line of credit established for overdrafts. However, for unauthorized transfers involving only your debit card number (not the loss of the card), you are liable only for transfers that occur after 60 days following the mailing of your bank statement containing the unauthorized use and before you report the loss.

[Musicat]

@Q.E.D.

No, I meant the one account that the debit card is tied to. Usually a checking account. When you use your card with the PIN, it’s processed as a debit transaction. However, if you use it without the PIN, with or without a signature, it’s processed as a credit card and the hold is placed on your checking account, as outlined in my earlier post.

Maybe things have changed, as I haven’t had a true credit card for many years. But back when I had several, I assure you that none were “tied” to any checking or savings or any other kind of bank account. The credit card company had no knowledge of any bank accounts I might have had or not had, nor did they seem to care. If I didn’t pay the monthly bill, they would have had to sue me. So there was no way they could put a hold on funds, but they could reduce the amount of remaining credit available by subtracting the amount of a current purchase.

[Q.E.D]

Ok, once again, I’m talking about debit cards, not credit cards. A debit card can be PROCESSED just like a credit card, but it offers you no credit line. It’s still a debit card.

[Miscue]

@SSG Schwartz

Just a couple, minor nitpicks. First, if you **credit card **was stolen and the thief used the card, you would be liable (well possibly). If your identity was stolen, the thief would most likely get a credit card that you would not know about.
SSG Schwartz

The times I’ve had to worry about this my accounts (linked to debit cards) with Paypal or similar services were hacked. Whether or not that fell to debit or credit or anything else didn’t matter to the banks; they could have cared less whether or not the physical card was still in my wallet. And while identity theft often entails people opening lines of credit in another’s name, I don’t know that it by definition precludes a person passing themself off as somebody they’re not in order to use an existing card or account.

[Gorsnak]

@DSYoungEsq

[quick history of US debit card systems]

Thanks for that. When Americans start talking about this subject it almost invariably confuses Canadians, for whom debit cards are always bank-issued cards accepted virtually everywhere. The Interac network was put in place in 1984, and if there’s an ATM or point of sale debit setup anywhere in the country that isn’t on the Interac network, I’ve never seen it. Major Canadian banks are all national (in the sense of doing business everywhere in the country) and very early on they set up a ATM network called Interac, which went on to introduce point of sale terminals in 94. The regional nature of banks in the US is utterly alien to Canadian experience with banking, and the whole Visa/MC debit card thing doubly so.

[DSYoungEsq]

@Gorsnak

Thanks for that. When Americans start talking about this subject it almost invariably confuses Canadians, for whom debit cards are always bank-issued cards accepted virtually everywhere. The Interac network was put in place in 1984, and if there’s an ATM or point of sale debit setup anywhere in the country that isn’t on the Interac network, I’ve never seen it. Major Canadian banks are all national (in the sense of doing business everywhere in the country) and very early on they set up a ATM network called Interac, which went on to introduce point of sale terminals in 94. The regional nature of banks in the US is utterly alien to Canadian experience with banking, and the whole Visa/MC debit card thing doubly so.

Part of the regional nature of American banking can be tied to two different aspects of the system:

1. After the crash in 1929, in order to put limits on the sorts of shennanigans that lead to the crash, banks were pretty much prohibited from engaging in interstate banking practices. Thus, a bank was limited to working within a given state. That eroded with time, but was still true to some extent in the 70s and early 80s when the ATM systems were being set up.

2. The Federal Reserve system is divided up into regions, and it is thus convenient for banks within a given region to play with each other, first, before thinking about playing with other regions.

Probably, had the VISA/MasterCard debit card system not been set up, there would have been consolidation of the competing systems that were being developed. The need for consolidation was essentially eliminated when the whole thing was taken over by the credit card companies.

Musicat, Q.E.D. is talking about debit cards that are processed as if they are credit cards (meaning VISA Check Cards, for example). You can still have debit cards that are not VISA/MasterCard branded (though they are rare), and, of course, true credit cards are not linked to a checking/savings account, since they are actual extensions of credit.

[Johnny_L.A]

I just came acrossthis article, which concludes that credit transactions are better than debit transactions for most people.

[ChrisBooth12]

I usually just tell them to do whatever is easiest or best for them because with older stores or keypads sometimes they have to dial in manually and type in a few numbers to use a card. So i just say whatever is easier to give them a break.

[The_Controvert]

Can’t they figure out a way to auto-detect that you have a credit-only credit card? You know, so there’s one less question to answer.

[Cluricaun]

A slight aside if I may, wasn’t TYME the first ATM servicer in the US, or am I regionally challenged?

[Mr.Slant]

If you’d like to understand liability issues here, the applicable federal statute/regulation is Fed Reg E:

Part 1005 - Electronic Fund Transfers (Regulation E) | Bankers Online

I had to learn some of it when I was on the other end of the “your frelling ATM machine took money out of my account and didn’t give me my cash” phone line.
Those were some happy consumers, I tell you what…

Trivia: If you’re forced, at gunpoint, to withdraw money from your ATM, the bank must take the hit, not you. Works the other way around if you’re robbed after using the ATM…

[Hilarity_N.Suze]

@The Controvert

Can’t they figure out a way to auto-detect that you have a credit-only credit card? You know, so there’s one less question to answer.

If I use my credit/debit card at a certain store the little swipe machine always asks “credit or debit?” but if I use an actual credit card, it doesn’t ask. So that one can tell the difference.

[daere]

I always use my combo debit/credit card as a credit card for secuity, but for a different reason than listed above. About 6-7 years ago I heard a news story… Apparently retailers were not supposed to be recording or tracking PINs. But, it turned out that they were keeping a record of PINs, and the reason they were announcing it was – you guessed it – they got hacked and a lot of card numbers and PINs were taken. So, I prefer to use my PIN in as few places as possible to limit the number of people/systems that have access to it. (And, actually, if there were a retailer whose system would not process my transaction as a credit transaction and required me to use my PIN, I wouldn’t shop there.)

[Mr.Slant]

Before I knew the solid financial and liability reasons, I had the exact same thinking.
The less times I key in my PIN with other people around, the lower the chance of someone shoulder surfing it.

[DrDeth]

@DSYoungEsq

There are downsides. First of all, it isn’t a credit card, so you don’t get advanced credit. You have to have the money to spend it. Second of all, some transactions can really put a crimp on the old bank account for a time: car rentals, for example, often result in a hold substantially larger than the actual expected rental fee, which reduces your available balance accordingly while the hold is on (and the hold may not be lifted for a few days after the car is returned). Last three rentals I made, I was advised not to use a combination card to process by the company (Hertz) itself. Thirdly, as noted above, if you are not careful, you can overdraw your account. For example, some gas stations only process a $1 charge at the time of the sale, and in such cases, your bank account doesn’t get a hold on the balance for the whole amount; the account isn’t debited until VISA/MasterCard process the transaction through their system. So if you are not very careful, you can get into trouble. And this gets intensified if your bank has the usual and nasty habit of adding daily fees for overdrawn accounts.

Right. Great post. In general, I’d say Debit cards are better for the Merchant and Credit cards for the user/consumer. But it makes sense to have both and use both carefully.

[DSYoungEsq]

@DrDeth

Right. Great post. In general, I’d say Debit cards are better for the Merchant and Credit cards for the user/consumer. But it makes sense to have both and use both carefully.

Emphasis added by me because I agree totally with that sentiment. :eek: