More "Plain Anglo Saxon" info please!


#1

I’m not so good at financial jargon. I’m also a Monzo newbie. My standard high street bank has always advised me to use my credit not debit card for online transactions. They said it makes fraud easier to deal with. I’ve always followed their advice. I’ve been lucky and never had to deal with any personal banking fraud to date so no experience. Once Monzo has its official banking status and a CA how secure will their debit cards be online? Would also love to keep the prepaid MasterCard please…


(Anthony) #2

(Anthony) #3

Hi!

Take a look here for plenty of helpful guides:


#4

Blimey lots of reading here :scream:. Do I get a degree at the end of it?! Ha ha ha :joy:


(Colin Robinson) #5

I’ve been using both my prepaid and my current account cards to purchase from Amazon (Both UK & US) and iTunes with no problems. Any issues I had were quickly dealt with in app by the support staff.


#6

What issues came up may I ask?


(Colin Robinson) #7

I didn’t know about the preauth charges from iTunes when I first started where they check you have an active card - support refunded them immediately and told me they would normally revert in about 7 days?


#8

This isn’t so much a matter of cards being inherently differently secure. Rather, I think there are two main difference between debit and credit card when it comes to security. But these have nothing to do with banking status, or the actual card being used.

1) Section 75 vs chargeback in case of faulty goods, non-delivery of goods etc.

This chiefly concerns not receiving your goods or services, or goods or services being faulty. There is a nice comparison here:

But the very short and simplified version is this:

  • For credit cards you have “section 75” protection. If you have bought an item that costs over £100 and paid even just 1p of that with your credit card, then the card provider is jointly liable with the merchant. This is a legal requirement that the card provider can’t “wiggle out of”. This can be particularly helpful if your merchant goes bankrupt (think Monarch), or sits somewhere outside the reach of UK law. The card provider can’t even tell you “sort it out with the merchant first” Under the law they are just as liable as the merchant. But there are two strong limitations
    • The £100 is per item. So if you bought return flights with Monarch, and each flight cost £99.99 (i.e. a total of £199.98) you have no cover. If you bought a single flight for £100 you have cover.
    • It generally doesn’t apply if you used any intermediary. That particularly applies to PayPal, but also some other payment processors (the world of payment processors is so opaque nowadays that it’s not always evident when your payment is or isn’t protected by section 75).
  • For debit cards (including prepaid) you have “chargeback”. This is a voluntary scheme run my Master/Visa/Amex. As such noone is obliged to help you (unlike Section 75 which is a legal obligation) and your mileage may vary depending on the card provider: Some are more helpful than others. On the other hand it usually has a much lower minimum amount (around £25).

2) Impact of fraudulent transactions on your finances

The other difference is how a fraudulent card transaction will impact your fincances:

In case of a debit card the money leaves your account immediately and will reduce your balance until any chargeback is resolved (which can take up to 45 days, I believe). If someone empties your bank account using fraudulent debit card transactions and you have a mortgage payment the next day, you will default on that, and that sucks really badly.

On a credit card your bank account isn’t immediately affected. Even if the fraudster maxed out your credit card, you won’t default on your hypothetical mortgage payment. You may even be able to resolve a fraudulent transaction by the time your payment is due (depending on how quickly you notice, and how quickly everyone acts, of course), thus never leaving you short of money at all.

This, I believe, may be a major advantage of using credit over debit cards security wise.

So, my personal practice is to use a credit card in these circumstances:

  • When buying something that costs in excess of £100 to avail myself of section 75 protection.
  • When using my card in high risk scenarios (where I fear my card may be skimmed/cloned etc). That includes (in order of descending risk in my personal assessment)
    • Hotels, as they seem to be notoriously bad at securing credit card information
    • Most online purchases, especially if a website wants to store my card details, as I have little confidence in their ability to keep my details safe
    • Payments in certain countries

#9

the last stats I saw showed restaurant transactions had some of the highest fraud rather than hotels


#10

Interesting. Do you have a link? (I only hear about hotels loosing credit card details all the time, so had always assumed hotels are much more affected, but I guess that’s more anecdotal, thus probably not a good indicator.)


#11

I saw it in the offices of one of the major card schemes (on 8th March 2017 showing figures to last quarter 2016) so I am not sure if it is available on the internet.


#12

Interesting. Thanks for clarifying!


#13

Incidentally I just came across this one:

As a summary: They suggest three reasons why credit card is better than debit:

  1. Better fraud protection
  2. Availability of cashback and other rewards
  3. Helps with credit scores (if used rightly)

As a consequence the suggestion is to use credit in all cases except

  1. When using a credit card would incur a fee
  2. When you’re buying from a small business
  3. If you’re in credit card debt

I think the last point is particularly important: Do not use credit cards unless you pay them off in full every month. Otherwise the interest really starts piling up.

This is obviously somewhat US-centric, and particularly cashback rates are quite low in the UK, but I think I can see the arguments for using credit cards by default, which is obviously the inverse of what I suggested above. I thought I’d post it for reference.


#14

Thank you to nanos and Richard for all the info :+1:


(system) #15

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