I use a debit card for almost every single transaction that doesn’t involve cash. I just believe that using credit cards for every day spend is a bad move, for reasons I’ve mentioned before.
There is, however, a contingency that believes that using a debit card—especially online—is risky.
The theory goes that if someone uses your credit card fraudulently, you haven’t actually lost any money and so there is no penalty to you. But if your debit card gets hacked, you’re out that money until/unless it gets reimbursed.
Which is interesting, because “with a credit card you haven’t spent money yet” is the exact same argument why I tell people not to use credit cards for every day spend.
But in any case, I had a chance to experience this situation first hand, as I got hacked recently.
And yes, money was stolen.
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Taking a pit stop
I check my online transactions frequently, as is good practice.
One day recently, I looked at my transactions and noticed these two:
That’s funny, I’m pretty sure I wasn’t in New Jersey recently. As a rule, I tend to remember the times I visit the Garden State.
Granted, I don’t always easily recognize the often cryptic line items on my statement, but this looked pretty straightforward: There was some purchase at this service station in New Jersey.
And I wasn’t there. But my card was.
I don’t know how someone got my card number, other than it’s probably pretty easy to do. I use my card online, and companies are pretty terrible at securing data, so I could have been part of one of many hacks.
Or even if not, card numbers are reasonably easy to guess. I mean, I couldn’t do it, but it’s not like certain types of cryptography, which would take many times the age of the universe to reverse engineer. It’s certainly possible.
Calling it in
I immediately called my credit union. I told them that I was very much not in New Jersey any time recently, and that I wanted these charges taken off.
The agent on the other end of the line filed a fraud dispute with VISA, and said that I should get credited within 7-10 business days.
Now, 7-10 business days felt like a lot to me. Did it really take that long to return money that was mine?
But I need not have worried. That very same day, my purchases were refunded.
So is this evidence that using a debit card is less secure and more risky?
The answer as I see it, is “technically yes, but actually no.”
Having lost money and then regained it, technically that is a bigger problem than having a charge made on a credit card and then having it wiped clean.
But I don’t think it matters, especially if you’re following our plan here.
The plan in this case is to have enough float in your account so that you don’t worry about when bills and expenses happen during the month.
How much money is that? Well, it depends on your needs and salary of course, but I see it being from a few hundred to a few thousand dollars.
Is it possible for someone to fraudulently remove enough money from your account that it is greater than the amount of float you have?
But if this were the case, would you not get it back eventually? How much could you be out? And what are the chances of this happening?
This feels like a lot of worst case scenarios to justify using a credit card for everything.
Using a credit card for everyday spend, you replace one risk with two:
- You will likely spend more money on a credit card. This is because you haven’t actually spent the money yet, so it won’t feel the same. Studies differ on how much extra you’re likely to spend, but I never hear anyone saying that they will spend less.
- All it takes is one screw up and you’re out some finance charges. Which do you think is more likely, you making a mistake, or having your account temporarily wiped out by a fraudster? I wouldn’t bet on me, and I focus on this more than pretty much anyone I know.
I mean, sure, have a credit card for backup source of payment if you want. A backup payment method is a good idea. But I’m still not convinced that using a credit card will be better over the long term.
Fear of flying
I think what this situation reminds me of is the person who fears flying so much that they won’t do it, preferring to drive instead. Never mind that statistically flying is so much safer than driving. With driving, you feel like you’re in control, even if that control means more harm done to you.
I had money stolen. I had money returned to me. I’m not using a credit card for my every day spending. Come fly with me.
Have you gotten hacked before? What was your experience?