Using a credit or debit card?
By the end of 2020 it is estimated of £40 billion will be spent online with debit cards. As most people know a debit cards take the money straight out of your bank account whereas credit cards lend you the money and you pay back all or some of it at the end of the month (the longer you pay it back the more interest you will be charged). Credit cards offer more protection online under Section 75 of the Consumer Credit Act 1974 so you generally have better protection than debit cards for online transactions. Many people have setup Paypal accounts linked to their debit card/bank account. This saves having to give out your card number to a third party so provides you with insurance and a little more safety when purchasing from a less well known company.
When purchasing online with a debit or credit card it is always worth checking the following:
- Does the site have a padlock (SSL security)? Look on the address bar for the URL and look for either a padlock icon or https.
- Check you have logged out of the website after a purchase
- Avoid using a public computer for purchases
- Shop with well know brands on official sites
- Do a review of other users experiences of shopping online with this company
The pros of a debit card
- Easy to carry. One little card, compared to a wad of cash.
- Debit cards are accepted almost everywhere in the UK and in lots of places around the world.
- It's safer than cash. If you lose your card, or it gets stolen, you can cancel it quickly and shouldn't be out of pocket.
- You can use them to get cash, usually with no charge. Some cash machines will charge you, but they'll let you know before you decide to go ahead.
- With some debit cards, you might be able to get up to £50 cashback at the checkout when you use it to buy something. This only works with some types of debit cards.
- You can shop online or over the phone, not just on the high street.
The cons of a debit card
- You can't use them to borrow money. The money needs to be in your account, or you need to have agreed an overdraft with your bank.
- The cost for using your overdraft might be as high as 40%.
- You get less protection than you do with a credit card, so you might not get your money back if anything goes wrong. Some debit card providers do offer something called a "Chargeback" scheme, which means they might be able to get some or all of your money back.
The pros of a credit card
- Credit cards give good protection against fraud.
- Credit cards provide extra protection if you have problems with the goods or services you have bought that cost between £100 and £30,000.
- Credit cards provide an easy way to pay for the unexpected.
The cons of a credit card
- If you don't pay back the full amount there's usually hefty interest on the money you've borrowed - unless you can get a card with a 0% introductory offer and make sure you repay in full before the introductory period ends.