I am not to familiar with credit cards and their fraud or return policies. Why exactly is it easier to refute charges with a credit card, more so than a debt card?
I think it boils down to the Truth In Lending Act [1] requires credit card companies to provide more protections than the Electronic Fund Transfer Act [2] requires banks to provide. And according to Wikipedia, the TLA is ~10 years older than the EFTA, so at one time only credit card transfers were protected at all.
And regardless of the law, it kind of makes sense. A debit card transfers money directly from your account to the vendor's account. With a credit card they have to get the money from Visa, and Visa has to get the money from you. If you say, "This isn't what I wanted, I'm not paying," it doesn't matter with a debit card because the money is already gone. Visa isn't going to get screwed, so if you threaten not to pay, they're not going to give money to the vendor until it's settled.
This page relates to your maximum loss if you lose your card, but it also details that the two instruments are governed by different laws.
If you lose your credit card, your max liability is $50. But if you lose your debit card, there's a sliding scale of liability (going all the way up to, "your entire balance") depending on how soon you notify your bank.
For a long time, there was no mechanism even to protest a charge on a debit card, so conventional wisdom has always been that credit cards were superior. Another poster here seems to be indicating that that's not the case any longer, but I haven't seen evidence of that claim yet.
From an outsider trying to reason why that's the case, this is what I've come up with: when you pay with a debit card, the money was yours, and now it's theirs: it's effectively an immediate transfer from your account to the recipient's account. When you pay with credit card, on the other hand, you promise the credit card company to pay some amount of money, and the credit card company promises to pay the merchant some amount of money. Credit card companies pay merchants in batches, not for each individual transaction, and so there's a significant amount of time before any money actually changes hands. Furthermore, even if you contest a charge after money has changed hands, the credit card company will simply withhold the contested amount from the next batch payment to the merchant, who is under contract with the credit card company to resolve the dispute appropriately or simply lose the money.
Credit card companies have a lot more leverage than individuals to lean on companies to respect their own return policies.
> Credit card companies have a lot more leverage than individuals to lean on companies to respect their own return policies.
Not just leverage, but an obligation. Or rather, even if your debit card says Visa or Mastercard on it, they have no legal obligation to get your money back. You don't have an obligation to pay the merchant, but the impetus is on you to get your rightful money back (the debit card company may help, but they are not required to).
With a credit card, they don't exactly have an obligation either, but this time it works in your favor - it's the credit card's money, not yours, and while you still have no obligation to pay the merchant, this time it's the company's money that is on the line (the collateral, so to speak). So they will fight tooth-and-nail to get it back, because technically if they don't, they can't collect any money from you.
(They may still try, but then you have to weigh the cost of a legal battle with them as well).
Think of this in the context of theft/fraudulent use of your card, and you'll see why debit cards are very risky indeed. (Remember that, even if you manage to get chargebacks on your debit card, you may still be liable for the fees for the temporary, eventually-reversed overdrafts!)
While I agree with your story, I do not think the difference comes from credit/debit. I have a debit card and I do not get any credit with it. However it has a VISA logo and I can still successfuly make complaints to my bank to get transactions reversed. I think the benefits are thus provided by VISA/etc, regardless of what services your bank provides through the card, like credit.
> I think the benefits are thus provided by VISA/etc, regardless of what services your bank provides through the card, like credit.
See my above reply - they may provide similar services as if as a "courtesy", but the legal obligations for both parties are very different with credit and debit cards (very much in the consumer's favor, if the consumer is using a credit card).
All new major debit cards come with the same ability to chargeback and coverage for bogus charges. But as mentioned elsewhere the major difference is that the debit card uses your money for a transaction and the credit card uses the bank's money. You could claim that the bank wants to get their money more than they want to get you back your money, but realistically it's probably more that the system is setup better currently for credit cards.
But the my vs. the bank's money is the reason I use my credit card almost exclusively for in person and online purchases. If I go to the Kwick-E-Mart, and pull out my PayPass (or other RFID) enabled credit card and someone snipes my credit card number from it as I swipe for cheetos, I'm fine if it's a credit card. They can run up 20k in charges on my credit card and I don't care (even if the credit card company doesn't stop it), I'll call my bank and tell them that they need to fix that, and probably go find a bad guy, also, I'm not paying that.
If they run up 20k in charges on my debit card before I or my bank notices, I am missing $20,000 from my account. Then I have to hope that the bank can and will fix it before my bills are due.
If used properly credit cards are month long interest free loans with no risk if someone steals the loaned money. Debit cards are wooden door to your bank account with a really aggressive, sleepy, deaf hound that you have to sic on the bad guys after you realize your money is gone.
I've never had a debit card. Every time I've opened a bank account, I've asked for a plain ATM card with no Visa or MasterCard logo instead. It's safer because there's a mandatory PIN and an enforced daily withdrawal limit.
A plain ATM carc might be very difficult to use to get money from your account in developing economies. We had issues with our MasterCard debit cards in Nicaragua.
"Visa, accepted everywhere," I always thought, "Yeah, and everywhere Visa is accepted so is MasterCard." Apparently, that is not the case.
Just FYI, if you're traveling to a developing nation, make sure that your ATM/debit card will work to extract cash from your account.
It doesn't cost the credit card company any money to to a chargeback, they just shaft the merchant whether the chargeback is legit or not. It's not like the merchant is ever going to stop taking Visa or Mastercard -- they'd lose way too much business. On the other hand, consumers are much more likely to switch credit card vendors if they get a better deal or better service elsewhere.
It is very possible though that doing this will result in blacklisting of your name/address/card from their systems. You generally don't want to do a chargeback on a merchant you ever want to deal with again at some time in the future.
Because it is part of the agreement with Visa. You purchased something that came with an agreement, they didn't hold up their end so you can reverse the transaction. End of story.
A debit transaction processes as an EFT against your checking account. A credit transaction goes through your credit card company. You don't get the liability coverage Visa/Masetercard/Amex offer you when you pay with a debit card - its up to you and your bank to try and get your money back, not the big credit card companies' lawyers/fraud departments.
Partly because it just is. Partly it is because with a debit card you would have to fight to get your money back whereas with a credit card the provider would have to fight either you or the retailer to get their money back if there is a dispute.
Debit cards carry reversal rights as well - at least in the United States. It's simply a mechanism to protect credit and debit card holders against technical issues, quality issues, fraud, etc.
> Debit cards carry reversal rights as well - at least in the United States.
It's provided as a service sometimes, but the legal obligation is very different (essentially absent altogether), as are the incentives.
With a credit card, the 'default' is that you don't pay the credit card company (and you have no reason to), so they lose out on the money unless they get it back from the merchant.
With a debit card, the 'default' is that the merchant wrongfully holds onto the money, and unless they get it back, you lose out on the money. Since they have no legal obligation to settle that dispute even when the customer is in the right, they may not, in which case you (the debit card consumer) lose out.
The only time I tried to reqest a chargeback for a debit card (one order charged twice because of an application glitch in the card processor's system) the bank asked me to prove that I did not receive the goods. It's not easy to prove a negation.
This is precisely why you should always pay with a credit card online.