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Consumer Advisory Bulletin

Credit Cards vs. Debit Cards: They May Look the Same, But They're Different!

When you purchase with plastic, there’s a real difference between a credit card and a debit card in how your transaction is processed and how you are protected.

Debit Card
A debit card is much like an electronic link to cash in your bank account.  Most debit transactions made with a Personal Identification Number (PIN) or at a point-of-sale terminal are immediately deducted from your account.

  •      Advantages: It’s a convenient alternative to carrying cash, you have immediate access to your money, and you pay as you go within your means.

  •      Disadvantages: You may face withdrawal fees at ATMs operated by an entity other than your card issuer.  Someone with your account number or PIN can access your bank account so think twice about using a debit card for online purchases or when traveling.  You also don’t have the same liability protection that you have with a credit card.


Credit Card
A credit card is a loan from the card issuer.  You are spending money that is not yours, with the expectation that you will pay it back.

  •      Advantages: If you pay your balance by your billing cycle deadline, with most credit cards it’s generally an interest-free loan (check terms and agreements). Credit cards offer more protections to consumers, when your card is lost or stolen or if you are simply disputing a charge.  Credit cards, if used properly, can also enhance your credit record and credit score.

  •      Disadvantages: If you don’t pay your balance in full, you may pay hefty interest charges that can really add up fast.  Credit card companies can also add fees, such as annual cardholder fees, balance transfer fees, and late payment fees that can cause long-term damage to your credit record and credit score.  Applying for credit cards can lower your credit score.


Lost, Stolen or Compromised Card?
Contact your card issuer immediately -- this will help protect you from additional unauthorized charges.  You should also file an incident report with your local law enforcement agency.  Keep a written record of these contacts.  Be sure to carefully review your banking and billing records following the incident.

If your debit card or debit number are lost or stolen, the card issuer cannot hold you liable for unauthorized transactions if you report the loss before the card or number are used fraudulently. Also, you are liable for only the first $50 in charges if you report the incident to the card issuer within two business days of discovering it.  If you don’t report it within two business days, you could be liable for up to $500.  If you don’t report it within 60 days of the date of the first account statement listing the charges, you could be liable for all subsequent losses. 

If someone steals your credit card or credit card number to make an unauthorized transaction and you report it to the card issuer immediately, you are not liable for any amount.  If you lose your credit card and report it immediately, your maximum liability is $50. 

To file a complaint or get more information, contact the Iowa Attorney General’s Consumer Protection Division, Hoover Bldg., Des Moines, IA 50319.  Call 515-281-5926, or outside Des Moines call toll-free at 1-888-777-4590.  Our website is: www.IowaAttorneyGeneral.gov.

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