NEW YORK (AP) - As debit cards grow in popularity, more Americans arestarting to use them to shop on the Internet. Before you join theirranks, there are pros and cons you should weigh.
Debit cards -- also known as cash cards, money cards, check cards orATM cards -- have an advantage over credit cards because they don't putyou in debt. And many consumers find that debit cards help them budgetbecause they function by pulling money directly from a checking orsavings account, so they can't spend more than they've got.
The problem with online use is that debit cards and credit cards aregoverned by federal regulations that offer different protections foreach in case of loss, theft or fraud.
Credit card transactions fall under the Fair Credit Billing Act, whichsets your liability for lost or stolen cards at a maximum of $50 if youreport a problem as soon as you discover it. Debit card transactionsare regulated by the Electronic Fund Transfer Act, under which a cardholder who is scammed can be liable for $500 or more.
The Federal Trade Commission has a consumer's guide to e-paymentprotections on its Web site at www.ftc.gov.
The major card associations, Visa and MasterCard, have tried toreassure consumers by promising them "zero liability" for fraudulent orunauthorized use of both credit or debit cards.
Some financial institutions are going further. Bank of America in Charlotte, N.C., recently announced it not only willhonor the zero liability protection for its debit cards, it also willreimburse a customer's account within 24 hours for unauthorized cardtransactions. "There's been tremendous growth in the use of debit cards, but thereare still some concerns, especially if the (debit) card is lost orstolen," said Robert E. Whyte, Bank of America's debit card executive."This concern over security was something we felt we could do somethingabout." Consumer advocates applaud the move by Bank of America and otherfinancial institutions, but they still have reservations. "A number of banks have been trying to add additional protections totry to make debit cards more secure and to encourage consumers to usethem," said Mari McQueen, a financial expert at Consumer Reports inYonkers, N.Y. "But these are not legal protections, and consumersshould be aware of that." She added: "A policy can change, because it isn't the law." McQueen said a major concern was that fraudulent use of a consumer'sdebit card can have "a domino effect" on a consumer's finances. "As a practical matter, when a debit card is used, the money is gonefrom your account," McQueen said. "What else will have happened beforeyou get it back? Will all of your checks have bounced with $25 inpenalties each?"
Susan Grant, vice president for public policy at the NationalConsumers League in Washington, D.C., recommended thatconsumers who want to use debit cards online should take a careful lookat a card issuer's Web site to learn exactly what protections areoffered. "These policies do vary, and it can be an uphill battle getting themoney reinstated in your account," she said. Grant added that settling disputes about defective merchandise ormisrepresented goods or failure to deliver ordered items can be moredifficult with debit card purchases than with credit, even if the cardissuers promise equal treatment. "You just don't have the same leverage, because they've got yourmoney," Grant said. As a result, she said: "We generally suggest that consumers use theirdebit cards in cash-and-carry situations. Credit cards are better whenyou're ordering things for future delivery, whether off the Internet orfrom catalogues." Copyright AssociatedPress
