When Should You Use a Credit or Debit Card?

Debit and credit cards may seem similar—one withdraws money from your account immediately, while the other sends you a bill later. But there are important differences to consider when deciding which card to use.

Although many debit card issuers voluntarily offer protections similar to credit cards, federal law does not guarantee the same dispute rights if you are dissatisfied with a product or purchase. Experts recommend using a credit card for online, catalog, or big-ticket purchases. Review your debit card agreement to understand what protections your bank provides.

Liability for Lost or Stolen Cards

Credit Cards

• Your loss is limited to $50 if your card is stolen.
• If you report the loss before unauthorized charges occur, you may owe nothing.
• You are not liable for unauthorized charges when the card is not physically present, such as online fraud.

Debit Cards

Your liability depends on how quickly you report the loss:

• Within 2 business days: Loss limited to $50.
• After 2 business days: Loss may be up to $500.
• After 60 days from the statement date: You risk unlimited loss on transactions made after that point, potentially including your entire account balance and any overdraft line of credit.
• If only your card number is stolen, federal protections are stronger, but you must still report unauthorized transactions within 60 days.

Zero-Liability Policies

Visa and Mastercard offer zero-liability protection for fraudulent transactions. These policies apply to credit cards and to debit cards used without a PIN.

Additional Protection

Many homeowners and renters insurance policies cover up to $500 in losses from unauthorized card use. Regardless of which card is stolen, always follow up your report with a certified letter to the issuer.