Why You Shouldn’t Shop Online with Debit Cards

Kirsten Thuringer

October 18, 2017  •  5 Minute Read

Credit Basics

Debit cards and convenience go hand in hand — they immediately withdraw funds from users’ bank accounts and allow cardholders to obtain cash just about anywhere without a processing fee.

That convenience has been the main factor behind the surging popularity of debit cards. According to a recent study by Pulse, financial institutions in the United States issue about 165 million new debit cards annually. Pulse reports U.S. debit card holders averaged 21.2 monthly point-of-sale debit card transactions in 2015, a notable increase from 16.1 monthly transactions in 2005. On average, these individuals spent $9,291 annually in debit card transactions, a steep increase from the $7,807 average one decade earlier.

Despite the convenience and popularity of debit cards, banks have long warned against using them for online purchases. While many consumers dismiss this advice as overly neurotic, there are plenty of valid reasons to keep your debit cards offline.

A Security Concern

The plastic debit and credit cards lining your wallet might look identical, but the way they function is dramatically different. Transactions with these cards are processed quite differently, meaning a debit card doesn’t offer the same level of security protections that a credit card might.

While a direct connection between your debit card and bank account offers incredible convenience, it also leaves you — and your finances — much more vulnerable than other payment methods. What does this mean for the average consumer? Even if you report a false charge on your debit card immediately after you notice it, you’ll probably have to wait several days to get your money back. And if you’re like most people, you probably won’t notice the issue until weeks after the fact — leading to additional charges.

For example, if you report a fraudulent charge within two business days, your liability is likely limited to $50. That liability jumps to $500 shortly thereafter, underscoring the need to stay on top of your finances at all times. And if you wait more than 60 days to report a false charge, you’re probably on the hook for the full amount.

Credit cards are a completely different story. Under the Fair Credit Billing Act, credit card holders are only liable for up to $50 of unauthorized charges — provided you report the fraud within 60 days. On top of that standard protection, most credit card companies offer zero liability protections, meaning they will waive the $50 fee in incidents of credit card fraud or theft.

Clearly, credit cards have a leg up on debit cards in terms of security. In addition to protecting your finances, most credit cards offer substantial rewards — airline miles, discounts, and cash back — that debit cards lack. Plus, credit card use improves your credit score, which affects everything from mortgage rates and car payments to utility bills.

6 Strategies for Safe Shopping

Even though credit cards are generally the safest way to shop online, using one doesn’t completely shield you from unauthorized purchases. Regardless of the type of card you’re using online, keep the following tips in mind:

1. Seek secure connections.

The local coffee shop’s Wi-Fi might seem great for making purchases and checking your bank account, but that convenience comes at a price. Public hotspots are not secure, and the open nature of these networks creates opportunities for hackers and snoopers. Save sensitive financial tasks for when you’re at home, at work, or in another location that offers a secure connection.

2. Look for the lock.

When you’re shopping online, check the address bar for the lock icon that indicates you’re using a secure website. You can also track your online security by watching for an “https” at the start of any URL.

Similarly, pay attention to any security warnings that pop up in your browser. This is particularly important whenever you’re entering credit or debit card information. If you’re on a site that seems suspicious, leave immediately — don’t click on any of the site’s links or navigation buttons.

3. Keep your personal information private.

No reputable online retailer will require you to provide your bank account information, Social Security number, or other similarly personal data. Unless you call your bank directly, you should never share this sensitive information. In addition to protecting your personal information, use different login information — usernames and passwords — for your bank accounts, credit cards, and online retailers.

4. Monitor your money.

It’s probably unrealistic to examine your bank account every day, but you should check in at least once a month — if not weekly. A routine examination will ensure you know sooner rather than later about any suspicious charges.

If you need a reminder to check your accounts, sign up for text alerts to keep your finances top of mind. Many banks and credit cards lenders offer these alerts for large withdrawals, login notifications, debit card use, and other actions.

5. Check your credit report and score.

The quickest way to spot any potential account fraud is to make a habit of monitoring your credit report and score. Most experts suggest checking your credit information at least once a year. If you plan to make a large purchase such as a car or home, you probably want to do it even more often.

You can obtain this information completely free of charge from several sources. In addition to getting your free credit score courtesy of CreditSoup, you can also check with your bank or credit card issuer for a copy of your most recent score. Some lenders even include a free copy of your FICO score with your monthly statement. Federal law also enables people to request one free report from each of the national credit reporting companies every 12 months.

6. Address unauthorized charges immediately.

Despite your best efforts, you could still find unauthorized charges on your card. If you spot any fraud, report it immediately to your bank or credit card company. Time is of the essence at this point, as any lag time could increase the amount of money you’re liable for. On a similar note, don’t pay any bills associated with fraudulent charges until you have spoken with your financial institution.

Fraud Is a Reality

It's important to understand the difference between debit and credit cards — particularly the protections they offer to cardholders. Credit cards offer an extra layer of security, generous rewards, and credit-building power that generally make them a superior choice for in-store and online purchases. While credit cards are certainly a better option than debit cards when it comes to online shopping, they aren’t foolproof. With a lot of care and a little bit of luck, consumers can enjoy the perks of online retail without exposing themselves to fraud.