Securing Your Credit and Debit Cards for Online and Other Purchases

I have had a lot of questions coming in this month on the best way to secure credit and debit cards when buying online. You have limited recourse when someone steals your credit and debit cards. Here are my recommendations when dealing with online and other purchases using debit and credit cards.

1. Debit Versus Credit Cards: Never use a debit card online. You have some recourse with credit cards, but none with debit cards. If someone uses your credit card illegally, you are only liable for $50, but if your debit card is stolen and used, you don't have this level of protection. The law that protects credits cards does not apply to debit cards.
2. Trust Factor: Try to only do business with people you trust online, and make sure they have a valid merchant account system like PayPal, Google or Verisign. Although I generally trust sites like Amazon, I am still very careful - one click on Amazon and you can accidentally buy something if you have the site set up wrong - I made this mistake. I now generally buy my books from book stores. I need to get out of the house once in a while anyway, eh!
3. Keep 3 Cards: I keep one credit card for automated purchases and another for general use. I request a replacement card every 3-6 months to remove any possibility of future use of the card numbers. This is important if you feel that your card information has been compromised and may be used for unauthorized purchases. I am not canceling the account. I am just getting new numbers for the account, which doesn't affect my credit score. I have a 3rd card, which I use as a spare. When I request a new card, the spare becomes my new general use card, because it takes two weeks to get a new card, which then becomes my spare. Between these 3 cards, I always have one for automated purchases, and just one for other purchases.
4. When To Buy In Person: I buy electronics in person. I have found that computers will die within a couple days or work well for many years - they have never done anything else. They always die early or last a long time. Returning a computer to a store is an easy task, and I come home immediately with a new one - no problem. Online purchases must be returned by snail mail, and you still have to drive to the post office and spend money to send it. If there is something you purchase that may or may not work after you buy it and get it home, be safe and buy it at a store.
5. BONUS - Phone Solicitations: When someone calls and ends up asking for your credit card, don't give it. Even if they say they are from a company you do business with and have personal information about your account. Get a phone number, verify it, and only if you feel it is necessary, then call them back.

These approaches were developed through my personal experiences where my time and money has been wasted. I hope this helps you keep from losing financial ground and time when dealing with credit and debit purchases.

PS - Note for Fritz: If you limit the funds in your bank account and an unauthorized debit card purchase is charged and puts your balance in the negative, the bank will typically charge a $35 overdraft fee. When this happens, you have additional problem. Also, credit card limits are similar to debit cards in that they charge over the limit fees, also around $35.

For anyone reading this, late fees were generally considered usury (predatory lending) and illegal in this country until around 2003, when it suddenly became "OK" for credit card companies to charge these late fees. Officially they had late fee policies prior to this, but the potential for legal action regarding usury was a big deal. 2003 marked the year that ALL credit card companies started enforcing late fees. Our leadership basically let the banks do whatever they wanted, which is what got us into the current mess we are all experiencing now.

If you want to really think about usury, think about owing 1 penny on your credit card, paying one day late, and then owing $35.01 on your credit card the next day. This is a 350,000% increase in just one day. 12 late fees on a 1 penny debt over a year represents $420.01 in total debt, which is an approximate 4,200,000% increase over one year!

Late fees on credit cards should be illegal, or at least limited to a small additional percentage of interest on what is owed. If you think 20% per year is bad, think about these late fees and what they represent.