Debit Card - Pay or Not to Pay

A recent article published by the American Association of Retired Persons (AARP) noted that not all card protections are created equal as it relates to debit and credit and noted six instances where consumers should select "credit" when paying with plastic.  The six places to avoid debit and the rationale given are noted below.


1. Gas Stations - Gas pumps are a popular target for "skimming", in which crooks place a portable card-reading device inside the pump, and thus make it more vulnerable to hack.  If consumers still opt to pay with their debit card, they should choose the "credit" screen so the transaction can be processed through a credit card network, providing greater protection if fraud occurs.

2. Online Purchases - If you don't receive the merchandise, it's defective or the wrong item, and the vendor won't issue a refund, it's easier to dispute charges with a credit card.  Many credit cards also offer extended product warranties, and some provide price protection up to 90 days.  Although certain debit cards offer these protections, the hassle factor can be greater.

3. Big Ticket Items - Rewards aside, the above mentioned credit card perks are especially useful for expensive products, whether purchased in store or online.

4. Restaurants - Eateries are among the few places where a payment card can leave your sight.  Even without a PIN, someone can use your card number to make fraudulent purchases online.

5. Retail Stores - If the FBI predictions of increased cyber-attacks via sophisticated malware targeting point-of-sale systems (also known as a "RAM scraper") come to fruition, consumers may want to bypass debit at checkout.  While credit cards are also vulnerable in such POS attacks, additional protections afforded limit consumer liability, notes the AARP article.

6. When a Deposit Is Required - Risk of identity theft aside, credit cards are a wiser choice for transactions in which the final bill is uncertain (e.g., hotels, rental cars).  Reason:  With a debit card, a "hold" can be placed on your account that may be greater than the expected bill.  If this occurs, you could be denied access to the additional hold amount from your bank account until the final bill is tallied.  With a credit card, hold amounts may initially appear as a pending charge until your final bill is paid, so it may not be debited for several days.