Credit cards...are they worth the risk?

[summer2007]

I have never had a credit card. I always paid in cash or check or with a debit card.

But after thinking about how you can get cash back and gain a little more interest on your own money it got me interested in maybe getting one and paying it off every month.

I would have no problem paying a credit card off each month my concern is the possibility of someone stealing my identity or something along those lines.

There were a bunch of stores last year that had their credit card info stolen and everyone that shopped there was in a mess.

I just wanted to see what those of you who have used credit cards think if these risks are worth it or not for gaining some cash back and a little interest?

Thanks

Jim

 

[Maurice]

I can't imagine not having a credit card. How do you purchase things online? How do you rent a car? Even checking into a hotel w/o one must be hard. International travel?

I personally view traveling with loads of cash to be riskier than owning a credit card.

Also, the identity theft risk can be hedged against - main thing is to get your credit info locked at the three agencies.

 

[summer2007]

I use a debit card for online purchases. I don't travel internationally.

Jim

 

[Maurice]

Ah, right. I can totally see living w/ just a debit card. I misread your post.

The only potential problem I can see is that some rental car companies in some locations won't accept them. I'm not sure the scale of this problem, I've had debit cards rejected for rentals in NY for sure.

 

[CompoundInterestFan]

I use a debit card for online purchases.

You're wary of credit cards but you use a debit card? You know that number can be stolen too, and if so, the thief has direct access to your money. I think credit cards are much safer in this respect. I've had my credit card number stolen a few times, and it was no big deal. Here's why: first off, the credit card company spotted the purchases pretty much right away and called me to ask whether or not I made them (it's scary how well they know your spending habits). I told them I hadn't, and that was that. The fraudulent purchases were frozen, and I was issued a new card. Second, even if the credit card company doesn't catch it, I will when I get the statement. And then I simply call the CC co, tell them I didn't make those purchases, and they'll be frozen as well. I don't pay for them unless they determine that I really did make them.

However, if someone steals your debit card number and withdraws your money, the money's gone. I'm sure you can talk to the bank and get the money back, but it's the difference of not paying in the first place (stolen credit card) vs. getting reimbursed (stolen debit card).

 

[dex]

It all comes down to using it responsibly. Many people spend more with a cc than cash. I try to avoid that I have my payments automatically deducted from my checking acct - avoiding late fees; mailing expense and time.

I never use my debit card, except for cash withdrawls - I believe DC have less legal protection than cc.

Go for it.

 

[Sandy]

I had shopped at that store that had all the credit card numbers stolen. The bank sent a new card, I had never seen any unexpected activity.

On the other hand, I used my debit card at a restaurant and the waitress had a skimmer - took the info and next thing I knew, the bank called me about a in store charge on the opposite coast, 1 hour before I bought gas locally. I filed a police report, the bank made good on the stolen funds and amazingly, the local and state cops along with FBI, used my charge and one other to catch a major ring. Sentenced to federal prison.

Moral of the story - lots of folks try to get your funds illegally - from the street corner hold up for cash to elaborate scams. The risk is all relative, and my experience is that plastic, in either debit or credit form, is pretty safe.

 

[lucija]

I echo CompoundInterestFan's thoughts... nothing is 100% safe, but credit cards are pretty safe overall.

I had my ATM card stolen about 15 yrs ago... I can tell you this, I would much rather deal with fraudulent charges on my credit card. With a credit card, it suffices to make a call and the charge is "gone" (and a new card is in the mail). With the ATM card, I had to file a police report, fill out a bunch of forms with the bank and wait for the $$ to be credited back. What a hassle...

 

[donheff]

I always use a credit card when I can. It generates frequent flyer miles and I never pay interest or fees. I am very uncomfortable with debit cards. I don't want to be popping my pin number into grocery store registers. That would make me worry that someone could steal my card and empty my bank account. Is there any guaranteed protection in that case? If someone steals my credit card I am protected. And the cost of that protection is already built into the price of goods we all pay for.

 

[OAG]

I echo what most everyone has mentioned. From my reading Credit Cards are much safer than Debit Cards. With a Credit Card your liability generally is limited to $50 which usually is not enforced if you report the loss in a timely manner (whatever they mean by that - quickly, I guess). With a Debit Card your bank account could be totally drained - if you keep a goodly sum there you could lose a larger amount of money and maybe not get it back as easily or maybe not at all. Besides as donherr mentioned about cash back applying to credit cards - which, to my knowledge, do not apply to DC's. Additionally, you get a long float with Credit Cards.

 

[mn54]

I can't imagine not having a credit card. How do you purchase things online? How do you rent a car? Even checking into a hotel w/o one must be hard. International travel?

I personally view traveling with loads of cash to be riskier than owning a credit card.

Also, the identity theft risk can be hedged against - main thing is to get your credit info locked at the three agencies.

Is locking your credit at the three agencies a hassle? What is the cost to lock and unlock? Have you had any problems associated with having your credit locked?

 

[Coach]

Jim, I think that if I were as comfortable as you are without a credit card, I would not get one just for the cashback and float. I very much admire folks who avoid using credit.

Coach

 

[audreyh1]

IMO a debit card is much riskier than a credit card. A debit card provides direct access to your bank account. A credit card has tons of protection.

I use a credit card regularly - but just for super convencience, and the cash flow (30 day float), as I pay it off every month. I have refused every debit card a bank has tried to send me - no way.

Audrey

 

[maddythebeagle]

IMO a debit card is much riskier than a credit card. A debit card provides direct access to your bank account. A credit card has tons of protection.

I use a credit card regularly - but just for super convencience, and the cash flow (30 day float), as I pay it off every month. I have refused every debit card a bank has tried to send me - no way.

Audrey

I have 1 debit card connected to a small balance checking account and dont rely on that balance for other bill payments...If you use one, you dont want to rely on that account for other bills while the bank clears up a mess....I got a debit card with that account because I have a few stores that only take debit card...Another problem with the rewards structures on these cards is that they require signature transactions to get the rewards....so you would want to use a credit card for that reason, also since the rewards are generally higher....

Banks want you to use debit cards because it is cheaper for them....

 

[OAG]

I have 1 debit card connected to a small balance checking account and dont rely on that balance for other bill payments...If you use one, you dont want to rely on that account for other bills while the bank clears up a mess....I got a debit card with that account because I have a few stores that only take debit card...Another problem with the rewards structures on these cards is that they require signature transactions to get the rewards....so you would want to use a credit card for that reason, also since the rewards are generally higher....

Banks want you to use debit cards because it is cheaper for them....

Bingo

Debit Card = Good for Banks.

Credit Card = better for the consumer.

 

[mickeyd]

Hey Jim,

just wanted to see what those of you who have used credit cards think if these risks are worth it or not for gaining some cash back and a little interest?

I don't think that the "cash back" feature is a good reason to apply for a cc, though it is a nice feature for sure. I have used a national credit card(s) for over 35 years and have never had a bad experience. Others may disagree, but I do not believe that my positive experiences have been unique. We currently charge about 99% of our monthly purchases via CC. We receive about $300 annually in cash back credits.

You may wish to obtain a CC with a low credit limit ($500?) initially and try it out for a while and consider having it increased over time or canceling it if it does not work for you.

The bottom line is that you should fully understand the benefits and drawbacks of having a CC and go with what works for you and your family.

 

[FinanceDude]

I think since banks are pushing the debit thing, they should be pushing Congress to make the liability of debit cards the same as credit cards.

After all, with all the money they're saving not clearing checks, they should have plenty of money for lobbying........

 

[Freein05]

You are protected under Federal Regulations when you use your credit card to make a transaction. Your maximum liability for fraudulent transactions when you use a credit card is $50.00. If you report it with in 30 of receiving a statement it is 0.

This is written in law. You do not have the same protection when you use a debit card.

 

[RetireeRobert]

You are protected under Federal Regulations when you use your credit card to make a transaction. Your maximum liability for fraudulent transactions when you use a credit card is $50.00. If you report it with in 30 of receiving a statement it is 0.

This is written in law. You do not have the same protection when you use a debit card.

Yes. As many have mentioned, with a debit card, thief could drain your entire bank account which is associated with the card.

Also, forget theft. if you make purchase with credit card and the merchandise is unsatisfactory or not delivered (as with mail order), you can dispute/withhold the credit card payment from the merchant until the matter is resolved/

With a debit card purchase, you are stuck with the bad goods or no goods if they are never delivered. The debit card takes the money from your account the instant the purchase is made. No way to dispute it or have any leverage on the merchant.

Credit cards way better---plus the cash back rebates, extra month to pay etc.

 

[Helena]

I either use cash or my Amazon.com VISA cc.
There is no annual fee and I pay it off every
month, so there is no interest... plus I get
points to purchase goodies on Amazon.com.

So, actually, I am being paid to use the cc.

 

[OAG]

Good article on the pros and cons of credit cards and debit cards in the Jan 2008 Readers Digest. Virtually an echo of this thread. Several horror stories about using Debit Cards. Some of the advice NEVER let your Debit Card out of yours hands/sight, ALWAYS use your PIN with them, NEVER use them to make advance reservations, NEVER use them to rent cars; most of the "NEVERS" involve the HOLDS that merchants can put on Debit Cards which can cause you to overdraw your Checking Account when regular checks hit the account incuring the Bank Penalties. They must be good for Banks as the article mentioned some large (in the billion or billions) that banks make on these overdraw penalties each year.

 

[chinaco]

Credit cards are useful... But I am not sure they are worth the 3% fee (or whatever the merchant pays visa) we pay on every purchase we make... even if you pay cash.

Most companies put the expense in the general cost of the merchandise or service and pass it on to all of us.

Personally, I believe the credit card industry has caused inflated prices. I think it is time for a regulation that forces the charge to be stripped off if it is not a credit card purchase.

The only benefit of a credit card is consumer protection for fraud. Debit cards are not quite the same... but close.



Person

 

[Zathras]

Most medium sized or larger merchants pay closer to 1% than 3%.
Your point is still valid of course, as that cost gets passed on to the consumer.
However, until a merchant can make more money by NOT accepting credit cards than by allowing them, everyone will continue to pay.

 

[OAG]

I thought we were talking about the credit cards issued by companies like VISA, MASTER CARD, etc., and debit cards issued solely by Banks. IMHO and from past experience I dislike the Store Credit Cards, they tie one to a specific store (or in the case like Sears to the stores in their "chain"). Too complicated for me to keep up with them. Give me a VISA or a Master Card (but not both).

 

[Meadbh]

I agree with the majority of posters. Nothing is completely safe. I could not do my job without having a credit card. Credit cards are relatively safe, but always, always check your bills. I have had my credit card scammed twice in 20 years and in both cases it was resolved to my satisfaction with minor hassle and no financial loss. I use one card only and pay it off in full every time. The time lag between the purchase and the bill payment date ensures that I have the use of the money for up to 6 weeks without interest. My choice of credit card gives me a steady flow of frequent flyer points which I use for personal long distance travel.