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Credit Cards vs. Debit Cards

Worst financial tool? A debit card

En español |  Fraud expert Frank Abagnale says the worst financial tool out there is the debit card. When it comes to fraud, debit cards put us at far greater risk than credit cards.

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Did you know that you might be responsible for just the first $50 of fraudulent charges on your credit card, no matter how much gets fraudulently charged? But with a debit card, you could be responsible for up to $500 unless you report the fraudulent activity within two days. And if you don’t spot the fraud for more than 60 days, you could be responsible for the total amount fraudulently charged.

A few tips

  • Some of the highest risk places to use a debit card are gas stations, restaurants, retail stores and online, which are popular places for scammers to install “skimmers.” These devices read your card and allow the scammer to clone your card or access your account. And with debit cards, scammers have been known to install cameras to film you as you type in your PIN number, leaving your account open for them to drain.
  • If you are going to use a card for a big ticket item, opt for a credit card.  Many credit cards offer extra protections, like extended warranties or protection against theft, breakage or loss. Plus, if you need to dispute the charge, the credit card company may withhold payment until the dispute is cleared up. If you do use a credit card for a big ticket item, be sure to have a payoff plan and use a card with a low annual percentage rate.
  • An alternative to using a debit card is to set aside a credit card that you designate for daily expenses – the kinds of expenses for which you would otherwise use your debit card. Pay the balance in full each month to avoid racking up interest charges.

Have you been scammed or have you spotted a scam? Share your story on AARP’s interactive Scam-tracking Map. You can also visit the map to read up on law enforcement alerts about scams and fraud in your area.