Worry-Free Online Transactions

Ray Martin Explores The Pros And Cons Of Different Forms Of Internet Payment

(CBS)  The Electronic Funds Transfer Act (EFTA), which applies to debit cards, specifies your liability for fraudulent transactions is $50 if you notify the bank within two days of a lost of stolen card and up to $500 if you notify after two days. Your liability may be unlimited if you don't report fraudulent transactions until after 60 days from the date you received the monthly statement on which those charges are reported. Some states limit your liability to lower amounts, and the Visa and MasterCard banks voluntarily limit liability to $50 or less, although they are not required to do so.

But fraudulent charges are not the only problem you need to be concerned about. Unauthorized or incorrect charges such as double billing are more difficult to recover because when you use a debit card, your money is immediately deducted from your bank account, and to get it back, you will have to work it out with the merchant, which may be difficult for online transactions.

The Fair Credit Billing Act, which applies to credit cards, specifies your liability for fraudulent charges is no liability if the unauthorized use involved just the credit card number, and only $50 in the case of a lost or stolen card.

And the FCBA also includes important and valuable settlement protections for disputing changes. First, when billing errors or unauthorized charges are made on your credit card, your liability is limited to $50.

This means that you can claim a dispute with your credit card issuer for the following unauthorized charges:

Charges for goods or services you didn't accept or were not delivered as agreed,

Charges that are incorrectly identified,

Charges that show the wrong amount, date or math errors,

A failure to properly reflect credits or credits.

To take advantage of these significant consumer protections offered under federal law only to credit card holders, you need to notify the "billing inquiries" department, not the department to where you send payments. This can be done over the phone, but also it is advice to do so in writing and send via certified mail, return receipt requested.

What does all this mean?

Here is the way I see it: When you file a dispute over fraudulent or unauthorized charges made on your credit card, it's the card issuer's money that is taken and they are on the hook to get it back from the merchant. They withhold payment to the merchant and have to sort it out with them. Your cash in your bank account is not involved. You are not inconvenienced by having to resolve an issue that is not your fault with a stubborn merchant who is slow to respond to your requests to correct their error (or worse, does not reply at all and is cheating you). Your credit is protected and your liability is limited to $50 by law.

But when fraudulent charges are made on your debit card, your cash is taken from your bank account and your bank account can be completely drained. You will then have to request that your bank make a provisional to your account and you will need to track down the merchant to request that they credit your account for their error (they typically will need to prepare a fax and send it to your bank instructing the bank to reverse the debit transactions in error.) You are not protected by federal laws and you may be left to resolve the matter on your own. Your liability could be as much as the total amount of cash and overdraft limits on your bank account.

The bottom line?

If used properly, credit cards are an easy and low-cost payment option for consumers buying products online. Also, credit cards by far provide the best protections for consumers and are my recommendation for making purchases online and anyplace else where accepted. I respect that many consumers hate credit cards (most likely due to their own personal issues with debt and interest costs), but both the Better Business Bureau and the Federal Trade Commission agree with my view.

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