Pros & cons of using a debit card online


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These days, debit cards are accepted almost everywhere credit cards are accepted, both in-person and online. And that can be a game-changer for consumers who are trying to control their spending.

Unlike credit cards, which allow you to borrow money from the card issuer to pay for a purchase, debit cards only allow you to spend the money you have deposited in your checking account. As a result, consumers can’t rack up bills that they can’t afford to pay. However, debit cards may not offer the same perks and consumer protections against fraud that you often get with credit cards.

Read on to learn how to use your debit card wisely (and safely) online.

Related: 10 personal finance basics

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Can you use a debit card online?

Generally, if a website accepts a credit card for online purchases, it also will accept a debit card. You may not see debit cards listed specifically as a payment option on a merchant’s website. But if the front of your debit card has a credit network logo (such as Visa or Mastercard) and the business accepts credit cards from that network, you should be able to use it.

To use a debit card for an online purchase, you’ll want to check “credit card” as the payment method and then enter your debit card’s account number, expiration date and three-digit security code (CCV) to make the purchase.

Unlike debit purchases you make in-person, you won’t need to provide your PIN when purchasing something online. The reason is that the transaction will be treated as a “credit” transaction, which means that the transaction is pending (meaning waiting to be authorized, cleared and settled). The money will be deducted from your checking account around two to four days later.

Before an online debit transaction clears, you may see a difference between your checking account’s “current” balance, which includes only deposits and deductions that have actually cleared, and your “available” balance, which includes authorized transactions that haven’t yet cleared.

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What are some pros to using a debit card online?

There are a few advantages to using a debit card as opposed to a credit card for online purchases that consumers may want to consider. These include the following.

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1. Reducing credit card debt

Using a debit card to make online purchases may help reduce credit card use (and debt). When you shop with a credit card vs. a debit card, you’re borrowing money you’ll have to pay back later. If you don’t pay the debt back within a designated period of time, the lender is going to charge interest. And if you only pay only the minimum required to carry your balance each month, that debt could grow into a hard-to-get-rid-of burden.

Sign-up bonuses, discounts, cash-back offers and travel points can make it tempting to use a credit card for every purchase. But shoppers need to be careful about paying off those purchases on time or they could end up spending more on interest payments than they receive in rewards. When you use a debit card, you can’t spend more than you have at the moment. And because there’s no debt, there’s no interest to worry about.

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2. Some debit cards come with rewards

While rewards and perks for spending are mostly associated with credit cards, many debit cards are now offering rewards programs as well, including cash back, points or miles every time you swipe your card.

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3. Lower fees

Debit cards typically don’t have any associated fees unless users spend more than they have in their account and incur an overdraft charge. By contrast, credit cards may come with an annual fee, over-limit fees (if a purchase pushes their account balance over their credit limit) and late-payment fees, in addition to monthly interest on the card’s outstanding balance.

There is also typically no fee for withdrawing cash using your debit card at your bank’s ATM. If you use a credit card to get cash, on the other hand, you may incur a cash advance fee. You may also have to pay interest on the advance amount, which often starts accruing the day of the advance, not at the end of the statement period as with regular charges.

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Is there a downside to using a debit card online?

There are some advantages to using a credit card over a debit card. Here are a couple of things to consider when making the choice to use a debit card online.

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1. Using a debit card online won’t build your credit score

Have you ever heard someone complain that they couldn’t get a loan or credit card because they’ve never borrowed money? They thought they were being financially responsible, but the bank didn’t want to risk lending money to someone who didn’t have a history of making payments on a loan or line of credit.

That catch-22 extends to purchases made with a debit card. Even though your goal may be to stay fiscally responsible by making only debit (i.e. cash) purchases to avoid debt, you’re not helping your FICO score, which represents how responsible you are with borrowed money. And even though you may have marked the “credit” payment option when paying online, the money is still coming directly from your account, so it won’t directly impact your score.

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2. Less fraud protection

You may have heard that it isn’t as safe to use a debit card online because federal laws don’t offer the same consumer protections that credit cards get. It’s true that there is a difference.

Credit card use is covered by the Fair Credit Billing Act, which provides a set procedure for settling “billing errors,” including unauthorized charges. If someone uses your stolen credit card account number to make online purchases, you generally aren’t responsible for those charges.

Debit card use is protected by the Electronic Fund Transfer Act, which also gives consumers the right to challenge fraudulent charges. Your liability depends on how quickly you report the problem, though, so you need to act relatively fast to get that federal protection.

If someone makes unauthorized charges with your debit card number and you didn’t lose your card, you aren’t liable for those transactions as long as you report the charges within 60 days of receiving your statement. You also could have zero liability if your card was lost or stolen and you report it before any unauthorized charges occur. If you report the lost or stolen card within two business days, your loss may be capped at $50. However, if you wait more than 60 calendar days after you receive your statement to make a report, and the thief goes on a shopping spree, you could lose all the money in any account linked to your debit card.

Some debit card issuers now offer “zero liability” protections that go beyond what federal laws provide. If your debit card is backed by Visa or Mastercard, for example, you may find you have the same protections they offer their credit card users. (You may want to check with your financial institution to verify this coverage.)

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3. Less purchase protection

Many credit cards offer purchase or damage protection, which means that if the item you buy is damaged or stolen within a specified period of time, you can get your money refunded. Credit cards may also offer extended warranties on electronic purchases and well as travel perks, such as rental car insurance. Debit cards are less likely to offer these perks.

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How to use your debit card safely online

To protect your identity while shopping online with your debit card, you may want to follow these simple precautions:

  • Looking for the lock. When making purchases with your debit card online, it’s a good idea to make sure you’re shopping with a reputable company and on a secure website, especially when it’s time to enter your card number. A good safeguard is to look for the locked padlock icon in your browser. It can also be a good habit to log out of a site as soon as you finish shopping.
  • Monitoring your statements. It can be wise to regularly check your checking account and scan for any debit charges you don’t recognize. That’s because the faster you report a problem, the less trouble you should have recovering from any fraudulent activity.
  • Using a secured network at home. You may want to avoid shopping or paying bills when you’re using public WiFi. Even secured public networks have some risk. And you never know who might be watching over your shoulder when you enter a password or other personal information.
  • Keeping your card and account number, to yourself. Giving your card or account number to a friend or family member could lead to trouble down the road, including charges you didn’t expect. And it may be difficult to recover any lost funds because the usage may not be considered unauthorized. If you want to allow someone you trust to use your account on a regular basis, consider adding them officially as an authorized user.

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The takeaway

Debit cards can be used online for most purchases and can be a great way to manage your spending. They generally don’t come with the annual fee and other fees found with some credit cards. Plus, they don’t allow you to rack up debt because you aren’t offered a credit limit that’s higher than your checking account balance.

However, credit cards often come with more perks and purchase protections than debit cards. And responsible use of a credit card can be a good way to build your credit score.

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