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Wednesday, October 16, 2013

Watch out for deferred debit cards

If you have a Visa or Mastercard, look carefully when it's next reissued. You may find, as I did, that your credit card was quietly replaced by a deferred debit card that is branded Visa or Mastercard. Your bank or financial institution might still call it a "check card", but that's just slang. Under the law, a card must be either a credit card or a debit card. A deferred debit card is simply one type of debit card.

This distinction can be very important:

  • Users of credit cards have much lower limits of liability than users of debit cards when a card is stolen or misused. Some issuers of deferred debit cards are reportedly offering the same level of protection as for credit cards, but this is a voluntary extension that could be withdrawn.
  • Users of credit cards have other rights under consumer protection laws that users of debit cards don't enjoy.
  • Using a debit card for a purchase that has an uncertain initial amount, such as a hotel stay, can result in freezing one's cash for a period of time.
  • Some if not most deferred debit cards can be used in either PIN mode or signature mode. You may find that a merchant, particularly overseas, does not accept one mode or the other -- leading to confusion or delay at check-out.
  • Deferred debit cards might not carry some of the benefits, such as insurance of rental cars, that your credit card did.
If you have a deferred debit card, I suggest that you avoid using it in places where it is mostly likely to be compromised: Internet transactions and restaurant transactions (where your card is often out of your physical control for several minutes). Avoid using it when purchasing retail merchandise for which there is any risk of dissatisfaction. And lastly, go online and check your transactions log every several days for possible misuse. It doesn't take long and could save you hundreds of dollars.