Debit card vs. credit card: Which is safer?

Are credit cards safer than debit cards?

When it comes to safety from fraud, generally speaking, credit cards are safer than debit cards. Think of it this way. When a fraudulent transaction happens on a debit card, the money comes out of your checking account immediately. With a credit card, it doesn’t. The credit card company is “out” that money, not you. Fighting to get back money that has already left your account can be time-consuming and stressful. Your funds may be tied up until the fraud issue is resolved.

Another important difference is the amount you stand to lose due to fraud. The most you can lose on a fraudulent credit card transaction is $50. Many credit cards promise zero liability for fraudulent transactions, period. All you need to do is report the fraud, and you get a credit on your statement. Your bank account is not affected in any way.

With a debit card, your liability for a fraudulent transaction depends on when you report the loss of your debit card. For example, if you report the loss of your card within 2 days, your liability is capped at $50. If you don’t report the loss for 60 days? You’re liable for up to $500. After 60 days, there’s no limit to your liability.

If I only use a debit card, I’ll never fall into unmanageable debt. Isn’t that “safer” for my credit score?

It’s true that using only cash, an ATM card, or a debit card may help you avoid unmanageable debt, but this won’t help build your credit score, since effectively, you are not utilizing any loan. The most direct, efficient path to great credit is to get a credit card, keep it open, and—this is key—manage it well by paying your bills on time and in full every month.

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