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February 3,2009

  • Credit or Debit; What's the difference?, Pt.4
     – Risk, acceptability and disputes.

    Previous...

    Risks(cont.):

    • Responsible spending habits: For people who can't control their spending, credit cards carry the greater risk. Debit cards have the built-in protection of stopping when the money's gone. Of course, they can still over-draft an account if there are outstanding charges against the account but, it's far less likely the amounts will be ten's of thousands of dollars as credit cards normally allow.

    Acceptability:

    • Using: Again, even though credit cards are fairly universal but, debit cards win again. Debit cards are accepted anywhere there is a swiper. They're usually considered ‘same as cash' and can be used during purchases to obtain ‘cash-over' at most businesses. With credit cards, the holder is limited by the type of cards that a merchant accepts.

    • Overhead: Debit cards win, here. Merchants have to pay ‘interchange fees' on every credit card transaction they accept as well as other financial overhead from the card associations and banks involved. Sometimes, merchants even offer discounts for not using credit cards.

    • Common: Both types of cards are much more readily acceptable than writing checks.

    Disputes:

    • Credit cards offer great advantages here, also. If you decide to return an item purchased with a debit card, it's almost the same as giving cash. The cash is now in someone else's hands. The card, itself, cannot be reimbursed and you have little wiggle room for dispute. If you do get a refund, it will either be in the form of a store credit or else cash (not good idea, for large sums of cash). But, if you were to purchase an item using a credit card and decide to return it, the reimbursement can be sent, electronically, back to your credit card account. You also have much more latitude to dispute the transaction, should the merchant refuse to cooperate.

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