We are current going through Dave Ramsey’s Financial Peace University program. In one of the lessons, Dave says that you are just as protected with a debit card as you are with a credit card. I take issue with this for multiple reasons.

To start with, here is a link to an article from Dave on this issue:

Dave Ramsey’s Advice About Debit Cards

I’ve had a hard time finding a lot of references for this issue that are recent, but here are a few random links, all of which appear to have been written after the April 4, 2000 deadline mentioned in the article above:

http://www.kiplinger.com/columns/fitness/archive/2001/ff20010808.htm
http://www.pirg.org/consumer/banks/debit/debitcards1.htm
http://www.insiderreports.com/storypage.asp?StoryID=20006836

Most of the articles above refer to credit cards being federally regulated [ie - there are legal requirements for them to protect you], and you are guaranteed the right to chargebacks. Apparently, however, debit cards are based purely on the policy of the banks, which they can change at any time.

One of the biggest reasons that I don’t use my debit card online is simply because if any fraud does take place, it exposes direct access to my bank account (so if a thief cracks the database of a retailer where I purchased something and steals the account numbers, they can drain every penny out of my account plus however large of an overdraft my bank will probably allow even though I’ve requested they not allow overdrafts.) In this case, I’m out whatever money was in my checking account until I can prove to the bank that it was fraud and get my money back (which can take months). With a credit card, once I file a claim, the money is back in my account right away (however - the bank does reserve the right to reverse the refund if they find that the refund is outside of their protections. I’ve never had that happen yet..)

Also, when it comes to renting a car or staying at a hotel, in my experience most companies will
place a hold on your account for much more than the actual value of the transaction, to ensure
they can get their money in case of any incidentals. This can cause a debit card to be declined
for other purchases on your trip, even though you have more than enough money in the account.

I’d love to hear what you think!