A recent breach at the Chipotle restaurant chain highlights the risk of swiping your debit card at restaurants and other businesses. Consumers often use debit cards instead of credit cards for smaller purchases, such as at fast food restaurants. However, debit cards expose consumers to greater fraud risks than credit cards. This is particularly true when the restaurant has not upgraded its payment terminals to utilize safer chip technology. Chipotle reportedly decided not to upgrade its terminals for fear of slowing down customer lines.
So why is using a debit card riskier than using a credit card? For starters, if your card information is used unlawfully, your bank is not obligated to restore the funds to your account for at least two weeks while it investigates the incident. During this time period, you may not have your funds available in your account to pay your mortgage, rent, loans, or other bills. Many people cannot afford to be without their money for that length of time. With a credit card, you do not have to pay for the fraudulent charges while your bank investigates.
In addition, debit cards don't carry the same legal protection as credit cards. Federal law limits your liability on a debit card to $50, but only if you notify your financial institution within two business days of discovery of the theft. If you wait longer than 60 days, you could lose all the money in your checking account, and any other accounts tied to the card. With a credit card, you have no liability at all as long as you have possession of your card.
If you enjoy the convenience of paying for your everyday purchases with a debit card, consider opening a no-annual-fee credit card account with a small line of credit for those purchases. Be sure to promptly pay off your bill in full each month to avoid any fees and finance charges. We recommend that you do not use any credit cards on which you carry a balance for this purpose, as that would increase your finance charges.
You can learn much more about the advantages and disadvantages of debit and credit cards, as well as other payment methods, by reading our Consumer Guide Privacy When You Pay: Debit, Credit, Cash and More.