Weigh before you pay: Debit or Credit Card?

By Kathleen Zenisek, First State Bank

How to pay?

Today, when you pay for goods or services it’s no longer a matter of just paying cash – a vast majority of purchases are made either with a debit or credit card. Both card types have different protections and uses. A debit card is a direct line to your bank account, so there are places where you might be better off using a credit card. If that is not an option, in instances where you are asked to select “debit” or “credit” – select “credit” for added protection.  With this option your PIN remains private and you gain zero-liability protection.  PIN transactions do not have that same protection.  The funds continue to be withdrawn out of your checking account for each transaction, you simply sign for your purchases instead of using your PIN.

Ten situations where you should use your credit card rather than your debit card:

1. Online or Phone Orders: Your debit card links directly to your checking account so use it cautiously and not for online or phone orders.  Using one specific credit card for all online and phone purchases is a good idea. If you must use a debit card for online purchases, some merchants have additional protection in the form of MasterCard® Secure Code™ or Verified by Visa. And never use your debit card for an online purchase while at a coffee shop or another business that offers free Wi-Fi access, as many of those businesses have unsecured wireless connections.
2. Restaurants/bars: When your debit card leaves your sight for a transaction, you don’t know who is looking at it and there are a lot of prying eyes at restaurant/bars. In addition, some restaurants may also approve your card for more than your actual bill assuming you will be leaving a tip.
3. Big-ticket items: Your debit card may not offer a long dispute period if something goes wrong with your purchase, and many times a credit card offers additional insurance to cover the item.
4. A deposit is required: When renting a summer cottage or home improvement equipment, a security deposit may be required, putting a hold on available money in your checking account. But with a credit card, the money is just "frozen" and not actually charged - you won't ever notice it's gone.
5. You’re a new customer: As a new customer, especially online (but see one above), you may be unaware of the quality of merchandise or service you are receiving. Using a credit card allows you more control in the event you are dissatisfied.
6. Buy now, take delivery later: Paying now for an item and taking delivery at a later date could take days or weeks. If the item arrives damaged or not at all, and you used a debit card to purchase the item, the money has already been taken out of your account and you need to take on the merchant yourself. When you dispute a credit card, it is taken off the record while the dispute is being investigated.
7. Future travel plans: Planning your summer vacation in January? Travel companies debit your card immediately.  Also, before you go on vacation, notify your credit and debit card providers of your travel dates and destinations.  You don’t want to be at an overseas ATM in need of cash only to find out your ATM card doesn’t work in that country.
8. Hotels and car rentals: As with future travel plans, hotels and car rentals will not only debit your card immediately, but they may also put an additional amount on hold in the form of a security deposit.
9. Gas stations: Sometimes you only want to put $10 or $20 of gas in your vehicle, but some gas stations put a temporary hold up to $100 that could last up to three days. Other times, gas stations only check to see if you have an open account and put through $1, if you are only checking your overall balance, you may overdraw your account.  This happens because you insert your debit card for authorization prior to pumping gas, so the gas station has no idea how much gas you are purchasing when the card is authorized.
10. Checkouts or ATMs that look “off”: If an ATM or card reader looks tampered with, avoid using it and report your suspicions. Don’t take a chance and put your debit card and bank account at risk.