Debit cards are, in most respects, treated the same as credit cards. Most notably, a debit card issued by either Visa or Mastercard (as most are… identified by the logo on the card), is bound to the same “terms of service” as credit cards issued by same.
Issuing financial institutions often add their own benefits to cards and some of these may differ between their credit and debit cards (so you should compare the written stipulations from competing institutions on both debit and credit cards before making your decision on a new card).
One notable area of difference, however, is in regard to fraud rules. Banking legislation known as “Regulation E” governs the protections afforded to debit cardholders which differ from those granted to credit cardholders:
When a transaction is under investigation with a credit card, the charge is generally reversed until it is investigated further. With debit cards, the charge stays on until the investigation is resolved.
Another difference is that you need to report the fraud within two days of “discovering” the loss (timely fashion), but “discovery” isn’t well defined, and you’ll be liable for up to $50. Any longer and you could be liable for up to $500. Now, some banks offer zero liability but the above rules still apply because they’re outlined in Regulation E (§205.6 Liability of consumer for unauthorized transfers).
Bottom Line: credit cards offer greater fraud protection and in some cases additional perks, but research (and common sense) shows that people (even those who are financially responsible) spend more with credit cards than with debit cards.
Only use credit cards if you pay them off every month, and even then, make sure you closely monitor spending from all payment forms in the context of a well-planned family budget. If you have a history or inclination towards abusing debt, cut up your credit cards.
Source: Blueprint for Financial Prosperity Blog Post
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