Do you shop online? Most probably you do. It’s great to shop online. There are good discounts, there is option of choosing from a wide range of products, there is option to compare easily and then there is the convenience of getting the good delivered to you. But when you shop online how do you make the payment? Is it cash on delivery or card? And if card, is it debit card or credit? If your answer is debit card, you need to stop doing so now.
Ideally, you should NEVER use a debit card to make purchases on the web. No, it’s not that the online shopping is not safe. It is safe. It is actually safer than the regular offline payments that you make — these too you should not make with a debit card — but there is something called planning for contingency. Not using a debit card is such planning. It can save you from a lot of heartburn if something goes wrong, and something can always go wrong.
There are two reasons why you should not use debit card for online or offline purchases, even in India where we have chip and PIN cards and where online transactions require either an additional password or a PIN.
Both the debit card and credit card allow you to make purchases using e-transaction. But there is one big difference. The credit card has a limit on how much you can spend. The debit card doesn’t come with such a limit. If you have money in your bank account, you can spend that using debit card.
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In other words, what this means is that if your debit card gets compromised — and you should always be vary of online frauds because they do happen — you can potentially lose all the money you have in your bank account. In contrast, if your credit card gets compromised you will — at worst — lose all the credit that is available to you.
It’s not your money that is available to you with a credit card. When you spend money using a credit card, you are spending your bank’s money although after you have made the purchase it becomes your liability and you have to pay, along with any fee or interest that the bank may charge you. This offers a sort of protection to you in case of the fraud.
Even if your credit card is compromised and used without your permission, it’s the responsibility of the bank to handle and avoid the fraud and not yours. If you card is misused, you can always explain to the bank that how it is a case of fraud and that you are not liable for it. In most cases, the banks will investigate the transactions and when they find that you are speaking truth, will not charge you for the fraudulent transactions.
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In case of the debit card fraud too, you can tell the bank about the misuse of your card and it is possible that you will get the money back. But the difference between the fraud transaction using a credit card and the debit card misuse is that in one of these transactions you will first lose the money and then — if your bank finds your claim true — you will get it back. Whereas in the other case, in the case of a credit card, you won’t lose any money, unless at a later stage your bank refuses to accept your claim of fraud and asks you to pay (which again is something you will be able to contest).
In other words, when you spend money using a debit card, you lose cash immediately. Your money is deducted immediately from your bank account. The credit card is different. Here too spend money but there is a gap between the transaction when you actually have to pay the money, which is usually at the end of your credit card billing cycle.