When it comes to spending money, people have pretty specific comfort zones. You might be a cash person, preferring anonymity to convenience. Maybe you’re an all-credit type who hasn’t carried cash in years. Or you might be devoted to your debit card — you have the ease of plastic, but without the crazy interest rates and the temptation to spend the funds you don’t have. If the debit is dear to you, you’re not alone: As of September 2010, there were approximately 520 million Visa and MasterCard debit cards in circulation, and by the end of that year, those cards had generated more than $1.3 trillion in purchases [source: Woolsey and Schulz]. To say debit cards are popular is an understatement.
Most financial experts agree that there’s no single best payment method; it’s just a matter of personal preference. But what should you use when it comes to online shopping? If you’re a debit card person, should you stay in your comfort zone when you’re shopping online?
As much as you might resist it, debit cards should not be used to pay for online transactions; a credit card is always safer for e-commerce. You’re not as protected against fraud when you use a debit card, and disputes with those cards can be difficult to resolve. Plus, if someone steals your debit card number, your entire bank account is vulnerable.
Credit card users, are protected by the Truth in Lending Act, which says you’re not liable for any debts if you report that your card has been lost or stolen before unauthorized transactions are made. Additionally, there’s a $50 limit of liability, even after your missing card has been used [source: Block].
The Electronic Fund Transfer Act, which regulates debit card use, is a bit more convoluted. You could be liable for only $50 — if you notify your financial institution within two days of realizing that your card has been lost or stolen. If you speak up later than that, but within 60 days of the date your statement was mailed (review your monthly financial statements to identify any unauthorized transactions), you could be on the hook for up to $500. Wait longer, and you could be responsible for every transaction — and quite possibly lose every cent in your bank account [source: Block].
Most banks do offer zero-liability debit cards, so you probably wouldn’t be completely emptied out if an online debit transaction goes awry. But if you do have to enter into a dispute, you’d be pretty much on your own (unlike in a credit card dispute, when the card issuer goes to bat for you). It’s your money on the line, and you could have some serious cash flow problems while the issue is being resolved.
Tips for Safe Online Shopping
Ditching your debit card is only the first step in online shopping safety. Even if you’re exclusively using credit cards for online purchases, you still need to be vigilant. Here’s how to keep yourself safe while shopping in cyberspace [sources: McAfee, Norton]:
- Don’t shop online unless your computer is protected with a firewall, plus antivirus and antispyware software.
- Make sure the site you’re buying from is secure and encrypted. When you’re checking out, the Web site address should start with https, not http. There might also be a key, lock or certificate displayed. This means that the site offers encrypted SSL(Secure Sockets Layer) transactions.
- Check the site’s contact information. If no phone number is listed, that’s a red flag. If you doubt the business’s legitimacy, try to contact someone at the company through e-mail before buying anything, and wait until you get a response before completing the purchase.
- Do your research. Check online buyer reviews of the site, and look at all its return policies, warranties and guarantees. Read its privacy policy to see how they’ll use your personal information.
- Watch out for hidden fees, like return shipping and restocking fees, especially on large electronics items.
- Never e-mail any personal account information or access an online shopping site through an e-mail link.
- Never store your payment information with a site that isn’t secure.
- Use only one credit card for online shopping. That way, there’s only one account that could be compromised in the event of loss or theft.
- Don’t buy anything from spammers or fall for a phishing scam. If a deal looks too good to be true (and the e-mail contains too many spelling and grammar errors to count), it probably is. And never e-mail or text personal information, passwords or PINs.
- Trust your instincts. If the site seems shady, don’t buy anything from it.
- Save all records and receipts for all online transactions.
- Monitor your accounts online instead of waiting for mailed statements. The earlier you spot a suspicious transaction — ideally, while it’s still pending — the better.
