John Roska: Credit cards have edge over debit cards for buying online
Q: Should I use a credit or debit card for online purchases? Is there any difference?
A: Legally, there are differences, which probably give credit cards the edge for buying online.
Credit cards are basically loans that you repay to a lender. Debit cards make withdrawals from your bank.
The fact you can run debit cards as "credit" blurs that distinction between the two different cards.
It doesn't really turn your debit card into a credit card. The money still comes directly out of your bank account to pay the merchant. The transaction still shows up on your bank statement as a debit.
The law treats credit and banking transactions differently. The law for the unauthorized use of credit and debit cards varies by degrees. For authorized purchases, it's very different.
Unauthorized use is when your card is lost or stolen, and used fraudulently, without your permission.
Thieves can certainly try to use a stolen card to make unauthorized purchases online. But the risk that your own online purchases will result in unauthorized use of a credit or debit card by others is relatively minor.
Authorized use is when you make the purchase, but aren't satisfied with the results. That's a real risk with online purchases, so the protections that credit card users have and that debit card users don't have can be important.
Your liability for unauthorized use of either a credit or debit card is limited, but differently. For credit cards, the absolute maximum liability is $50, and could be zero if you report a missing card before it's used.
Your liability for someone else misusing your debit card depends on how fast you report the loss, theft or unauthorized use.
If you report before any unauthorized use, your liability is zero.
If you report within two days of "learning of" the loss, theft, or unauthorized use, your maximum liability is $50.
If you take between two and 60 days to notify your bank, your maximum liability increases to $500.
If you don't report unauthorized use of a debit card within 60 days, there's no limit on your liability. So if you don't catch it on your bank statement within 60 days, you eat the entire loss.
The company that issues your credit or debit card may protect you more than the law does.
Visa, for example, has a "zero liability" policy for the unauthorized use of both their credit and debit cards. Without that extra protection, though, the unauthorized use of a debit card can hurt much worse than the unauthorized use of a credit card.
The Fair Credit Billing Act allows credit card users to dispute authorized charges on their bill.
When it's a dispute over goods that never arrived, or were junk, you take your beef to the credit card issuer. They step into the merchant's shoes, often taking back from them the disputed payment.
Debit card users don't have the same right to dispute authorized purchases that go sour. And since the merchant has gotten paid, and the debit card issuer usually can't take that payment back, the merchant's unmotivated to resolve your dispute.
So, for disputes over an online purchase you made, credit cards provide a real edge.
John Roska is a lawyer with Land of Lincoln Legal Assistance Foundation. You can send your questions to The Law Q&A, 302 N. First St., Champaign, IL 61820. Questions may be edited for space.