I just read a thread where the comments heavily suggested OP use a credit card when they travel again so that it would be easier to dispute a fraudulent charge. What makes a dispute through your bank less successful?
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In the UK they are covered under separate regulations. A credit card is a purchase on credit or finance whereas the debit card just comes out of your current account. Credit purchases in the UK are heavily regulated and customers can claim a charge back under section 75 of consumer credit act. So if a purchase is made online and its missold, never arrived etc, you claim through section 75. Debit cards, you’re reliant in good part on the goodwill of the banks (if such a thing exists).
In the UK, if you pay for something expensive (over £100 and less than £30k) with a loan, and there is a problem, then the seller and the loan company are BOTH required to make it right. If the seller is not helpful or bankrupt, then you can go after the lender.
This doesn’t apply if you just get a loan separately, but it does apply to credit card purchases, “but now pay later” deals, car dealer finance deals, or other cases where the seller arranges a loan for you.
This law was introduced because of scandals years ago where people had to keep paying for items that were defective or never even delivered. The supplier had gone bankrupt but the separate finance company still wanted their money.
Note that banks do have the ability to do “chargebacks” for debit and credit card transactions of any size. But that is based on the contracts between everyone involved, and the bank can use their judgement, and may refuse. In contrast, “Section 75” is a legal right, and you can take your credit card company to court to get the money. And your credit card company knows that, so they will help you.
That’s why if I make an online purchase or at a different place I use my credit card and not debit card.
In the US, the Federal Consumer Credit Protection act, and various regulations created under it, limit a consumer’s liability for fraudulent charges. Basically, the banks MUST protect you against fraud, in most cases, because that’s the law.
There really are no equivalent laws when debit cards are concerned, so you’re basically relying on the bank’s goodwill and own policies to address fraud.
Also, with credit cards, unless you’ve already paid your statement balance before you report the fraud, you haven’t actually transferred any money, so it’s the company that is on the hook. But with debit cards that money has already been deducted from your account, meaning that you’re essentially asking the bank to pay you back.
Aside from credit cards being a giant IOU, the money isn’t instantly gone like a debit card. I know some financially illiterate finance folk like sing the praise of debit cards, but they are terrible.
The only time a debit card is good is if you are literally incapable of controlling your spending
Debit cards are used by poor people. Credit cards are used by rich people. Rich people make the rules.
The law.
Debit cards are newer than credit cards, and the laws regulating them were written later, by a more business-friendly Congress. Credit cards have a maximum legal liability (for fraudulent use) of $50, a dollar amount that AFAIK hasn’t changed one bit since the initial regulations were written. And while the bank investigates they can’t charge you the disputed amount. (If the investigation goes against you, they can retroactively charge you interest).
$50 is so little that many banks just forgo it so they can tout a “100% Fraud Protection Guarantee” that’s worth… $50.
Debit cards have a $500 liability limit. And during an investigation, you’re out the entire amount that was stolen from you. No wonder banks push debit cards so hard (for most banks, ATM cards got promoted to debit cards, like it or not).
As someone who works in hospitality. Along with all the other great information here. When checking into a hotel some usually put an incidental hold on the card you use.
For a credit card that puts a pending authorization on the account, and will stay pending until the credit card is charged X amount for the stay or until it is released at check out. For a debit card there is no pending hold, the amount authorized is fully taken out of the account like it is a payment. Even worse is it can take up to 10 Business days to get that money back in your account after it was released. A credit card it only takes 2 – 5 business days for that pending charge to be dropped.
So if you are traveling with only a debit card with the amount of your hotel stay and some extra spending cash, but didn’t realize the hotel also holds $50 a day in incidentals and you are staying 4 nights that extra $200 just came out of your spending money. You’re gonna have a bad time.
Please remember the front desk staff is not holding your money. There is nothing we can do to get your money back to you any quicker. Please call your bank and leave us alone!
The biggest factor is whose money is tied up during the dispute. With a credit card, it’s the bank’s money while with a debit card it’s money out of your bank account.
A credit card isn’t spending your money, it’s spending a company’s money. That company has incentive to find and stop fraudsters, both because of financial reasons and because of legal requirements.
When you use a debit card, it’s basically the same as cash. You are taking your cash and handing it to somebody else *digitally*. It has left your account, which means it cannot easily be tracked or recovered.
Debit cards are also much harder to use when stolen (because they are PIN protected).
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