Check, Credit Card or Debit Card? Choosing a Payment Method for Security and Convenience

• Convenience. Debit cards easily replace the need for cash for daily purchases, ranging from morning coffee stops to evening supermarket runs. They also save time over personal checks at the cash register and for many online or mail purchases.
• Debt management. Because debit transactions withdraw money directly from a checking account, users aren’t adding to a credit card balance.
• Record keeping. Monthly statements provide a record of all expenditures made with a debit card.

• Risk of card theft or compromise of account information. If your debit card or account number and expiration date is stolen, the thieves will be taking money directly from your checking account. Theft of both debit and credit card account information is a continuing problem. For example, thieves have hacked the databases of major retailers obtaining account numbers. Theft by “skimming” has increased where numbers are stolen off card swipe machines using various methods. In very rare cases, thieves in retail outlets have stolen the information of the magnetic stripe while observing the PIN key strokes of the consumer. You are not liable for such losses at DCU.
• Timeliness of access to your funds during investigation. If you have reported an erroneous or fraudulent debit card withdrawal, the financial institution does not have to credit the disputed funds to your account for at least 10 business days while it investigates. (DCU asks only 5 business days or less to give you provisional credit.) During that time, you may not have the money you need to pay other bills or outstanding checks or debits could bounce.
• Less consumer protections than credit cards. The consumer protections on a debit card are not as strong as on credit cards. The federal Electronic Fund Transfer Act limits your liability for unauthorized or fraudulent withdrawals using your debit card to $50 if you report the loss of the debit card or discovery of the erroneous withdrawal within 2 business days of your discovery of the problem. If you take longer than 2 days but less than 60 days, your liability rises to $500. If you take longer or in certain other circumstances, you could be liable for the total loss (which could be as much as your total balance plus maximum overdraft protection you have). Federal regulations for debit cards offer no protection against a dispute with the retailer over the quality or status of the goods or services – the same as with cash or checks.
• Possibility of overdrawing your account. If you don’t keep track of your debit card purchases in your account register, it’s easy to overdraw your account, incurring fees for “bounced” charges or possibly for overdraft protection.

• Convenience. Credit cards are widely accepted for a variety of purchases. They, too, can lessen the need to carry large sums of cash.
• Flexibility. Because they are loans, credit cards offer a way to manage your cash flow if used wisely. For example, you might need to make a large purchase which you cannot cover out of checking until your next paycheck. Using a credit card allows you to purchase the item today and pay it off when your next credit card statement arrives or over several months.
• Emergency access to cash. While it is prudent to save ahead, you may not have the savings to pay for a major car repair or replace a dead washing machine for example. A credit card allows you to spread the cost of the unexpected into more affordable monthly bite-sized pieces.
• Good consumer protection. The Fair Credit Billing Act provides several consumer protections. First, your maximum liability for fraudulent or unauthorized use of your card or account numbers is zero if you report the card lost or stolen before it is used and $50 if you report the loss after an unauthorized use has occurred. If your account number only is stolen (you have the card secure), your liability is zero. Many card issuers offer zero liability for all fraudulent use. Second, the law offers protection if you have a dispute with a merchant over a billing error such as an overcharge or charge for goods that were not delivered and you follow the rules for reporting it. Third, the credit card regulations allow you to stop payment under certain circumstances. All these protections can be exercised without your paying any money from your funds.
• Record keeping. Monthly statements provide a record of all expenditures made with a credit card.

• Self-discipline is required. If you have control of your expenses, plan your purchases, and know how you will repay your loans, you will have no problems with credit cards. However, if you tend to make impulse purchases without thinking about or knowing how you will repay it, you could easily build up more debt that you can afford. The majority of consumers can handle it. But people who are only making the minimum payments each month are often heading for serious credit problems.
• Interest and fees. Credit cards purchases are loans on which you pay interest if you carry a balance. The average purchase interest rate was 14.53% in the 2007 Credit Card Survey conducted by consumer-action.org. But many cards have higher rates, particularly if your credit history is not good. If you pay a bill late, you will typically incur a late fee, average $28 and often higher. And paying your bill late, even one day late, may trigger a higher interest rate. And there are other possible fees. It is vitally important to pay all your bills on or ahead of time to avoid fees and maintain or achieve good credit ratings.
• Risk of card theft or compromise of account information. Theft of credit card account information is a continuing problem. The biggest frauds have occurred at merchants such as BJ's and TJX that did not adequately protect customer credit card data stored on their computer systems. Contrary to what many believe, online fraud is actually more rare than card numbers stolen by retail store and restaurant employees. You are not liable for such losses at DCU.

• Paper trail. Even though many customers don’t get their cancelled checks back, most financial institutions provide a digital image of the front and back of the checks. Many people find this useful for their record keeping. However, if you use financial management software such as Quicken or Money, you'll find debit and check card transaction data has more information than checks.
• Some security issues. Although crooks have been passing counterfeit checks since checks were invented, many merchants check identity and signature when accepting personal checks which customers often feels adds a layer of protection. Lost or stolen checks typically cannot be used as easily or quickly in retail outlets as a debit card or even a credit card. High tech crooks have found ways to print fraudulent checks or alter stolen ones.
• Comfort. People who grew up using checks and who have some mistrust of online security for many merchants and services may simply prefer to use checks for some payments.

• Security issues. A check, like a debit cards, provides all the information a thief needs to access your checking account. Leaving checks in envelopes on residential mailboxes for pickup as many individuals do is a security risk. Giving checks or checking account information to people or businesses you don’t know are reliable is also a risk.
• Postage costs. Individuals who pay bills by mailing checks incur costs for postage. The majority of financial institutions provide online bill paying free to account holders.
• Possibility of overdrawing your account. If you don’t keep track of your checks and balance in your account register, it’s easy to overdraw your account, incurring fees for “bounced” charges or possibly for overdraft protection.