Hacker News Reader

Comment by sharpercoder | Hacker News Reader

A great story. What I do not understand (I am a European) is that he uses a credit card, but not a credit card. I just did an AirBnB and I was prohibited by the system to use my debit card. I was outraged. I still am. I had to buy a separate debit-credit-card to be able to use AirBnB services. AirBnB supports iDeal (Dutch payment system), but only for bookings >6 days.

From my point of view, using a debit card is far superior to using a credit card. Why would I want to debt myself to pay stuff? I have enough on my account to pay for a mere AirBnB. I don't want to indebt myself. yet, there is a system which forces me to.

View on HN

To my knowledge, it's because if somebody steals money off your debit card, they've stolen YOUR money. You gotta fight with the bank to get it back.

But thanks to consumer protection laws, if somebody steals money off your credit card, they've stolen the BANK'S money. It's up to the bank to get it back.

They've stolen the merchant's money if it was an online transaction. Bank only takes the fall for card-present transactions.

The key is that it's somebody else's problem, not yours.

Sure. As a merchant myself, though, I cringe at generalizations that the bank eats the cost.

Personally, I think they should, because they have access to the aggregate data that could prevent more of it.

Because they take no hit for online fraud, however, they do almost nothing to make things better.

Well, they implemented 3D Secure. I've had to use it quite a few times for online purchases this year (I use an European CC, if that makes a difference).

Although apparently it's a crappy protocol and it's used to shift liability to customers[1], so yeah, they could do better.

[1] http://www.cl.cam.ac.uk/~rja14/Papers/fc10vbvsecurecode.pdf

Verified by visa (and similar) in the US just never took off. You have to implement it as optional, as most consumers have no idea what it is. So very, very, few people use it if you turn it on.

I dont think that's true with vBv and Securecode - I believe that indemnifies the merchant of stolen scenario if enabled, at least in Europe.

His recommendation is based on the USA consumer protection laws so it may or may not apply in other countries.

For credit cards, US law limits your personal liability to $50 (typically $0). "Under the FCBA, your liability for unauthorized use of your credit card tops out at $50. However, if you report the loss before your credit card is used, the FCBA says you are not responsible for any charges you didn’t authorize. If your credit card number is stolen, but not the card, you are not liable for unauthorized use."[1]

If you contest a charge, you are NOT required to pay that amount until the matter is resolved. Resolving it typically takes two or more months, but it isn't your problem and doesn't affect your life during this period. If it is resolved in your favor, dealing with the loss/recovery/reversal is not your problem, it is like it never happened (for you). The bar you need to achieve to show a charge was fraudulent is pretty low - typically a phone call to challenge the charge and a followup letter with a statement and any documentation available (as simple as stating you did not order/receive the goods shown or the goods were damaged).

Debit cards typically have limits to liability, but the stolen money is not restored until the matter is resolved. It typically is a LOT more work and can be several months to get the card issuer to make you whole again. Also, with a debit card, the theoretical limit of what the thieves can take is ALL the money in your bank account (and more with overdrafts). The bills don't stop while you are unwinding the mess and your money is unavailable... You can end up in a big hole; restoration of original funds that were stolen does not make you whole because of the "knock-on" charges and losses while your money was unavailable.

[1] https://www.consumer.ftc.gov/articles/0213-lost-or-stolen-cr...

In Australia, my debit card was stolen. My bank worked out this fact before I did, and sent me a text message. The charges were reversed within 3 days.

You're still without that money for three days, instead of zero days. Credit cards act like a buffer to your real money, so disputed transactions have no real effect on you.

Debit cards costs less money to shops and so on (transaction cost). Maestro system is way cheaper than anything else.

Credit cards are annoying that your balance isn't updated immediately, they're much more costly to operate, more fraud tolerant (just need to copy the numbers) while the benefit only applies to US and maybe a few others. Meaning, any bank here will pay you back regarding debit card fraud similar to the other response.

Credit/debit cards; it's weird that having such a card results in so many differences other than paying on credit/debit.

You can immediately pay off your credit card balance if you so desire and credit cards (at least American ones) don't charge interest initially. So if you automatically have your credit card debit from your checking account each month there is literally no cost to you to use a credit card and only upside.

The merchant is already pricing in credit card fees into their prices, so you should go with the payment instrument that provides you the best protection and other perks — otherwise you are leaving value on the table.

there is literally no cost to you to use a credit card

I don't know what it's like in the US, but at least in Sweden basically all credit cards have an annual fee.

Mostly no annual fee in the US, or if there is a fee you are getting some worthwhile rewards or benefits out of the deal.

I use a Revolut card for this purpose. Pre-pay the card, pay the amount required. Also benefit from interbank rates for foreign transactions. Also means that if the card details are stolen from the merchant or processor, or are stolen in transit, all they have is a prepay account number with a $0 balance 99.999% of the time. If they get my checking account debit card number, they could easily take dozens of dollars on any given day. Dozens!

Because the risk of being out of pocket for a period of time is higher with debit cards than credit cards.

If you just think of your credit card as a delayed bill, where you can quibble over charges trivially, they're not like debt at all. Always pay off in full every month, automatically.

Prepaid Credit Cards are also usually poorly supported and may get your account locked up (tried to signup for Mailgun).

Which I find a bit weird, a Prepaid Card is my safest option considering I have no want for a Credit Card at all. I pay my bills immediately or as early as possible, I don't even like ongoing costs and I try to buffer then into yearly payments if possible (which usually also means you get stuff cheaper)

It’s all about putting fraud liability completely on the bank and not on yourself for the duration of an investigation. And building credit.

From a general point of view: using a credit card responsibly will improve your credit rating.

A debit card won’t.

I had to explain this to a school friend recently as he has never owned a credit card and avoids loans - preferring to save first, then spend.

When it came time to get a mortgage he couldn’t get good rates - or a large enough loan - as his credit history was so lacking.

He was infuriated but I pointed out to him that it makes sense from a lenders point of view: they gave no record of him being able to manage debt responsibly.

So that’s one reason to use a credit card, though likely not any reason Frank would suggest (he’s going with their better protection and coverage)

> So that’s one reason to use a credit card, though likely not any reason Frank would suggest (he’s going with their better protection and coverage)

He does mention it: by giving his sons a credit card, one benefit is that when they graduate college, Frank has essentially built their credit for them.

In other words, American banks extort their customers to go into debt with them early and often.

Credit cards are more like a delayed bill than debt, if you pay off the amount in full every month (and I don't know why you wouldn't, credit cards are a poor way to borrow money).

A delayed bill is a debt, so it's impossible for something to be more like a delayed bill than debt.

They are also often the best method consumers have to borrow money for many purposes.

A debt has interest; a delayed bill doesn't. An interest-free loan is literally free money (the difference between net present value of future repayments and current value, which will be higher); I always take 0% finance if it's on offer.

(The only exception would be in a deflationary environment.)

And yet, most credit card users do NOT pay off the amount in full. Why do you think banks push these cards so hard?

Don't they? Everyone I know does, who I've talked to about it.

Seems a bit like Trump supporters.

And that means that they, in turn, could be a credit risk. Which is what was being talked about.

Although it has to be said a running balance is not actually a direct credit risk. It doesn't make financial sense, as you're racking up interest fees, but if you are safely managing your payments (no late ones) and your credit usage (a percentage of what your total available credit lines are) then it's not a bad thing for your credit score.

Not that I would recommend it of course.

To be fair, you can pay off the full amount of your credit card every month and never have to pay interest. A common misconception is the idea that you have to pay interest to build credit.

Er.. no. Credit ratings are basically a giant risk assessment.

The more you demonstrate your ability to manage debt (and you can do that by simply paying off your card every couple of weeks) the better you demonstrate your ability to do so. More data points, so to speak.

Of course if you can't manage that then that's data too.

Credit cards have consumer protections and dispute resolution processes like chargebacks. Debit cards often have nearly zero recourse for disputes. Why would you want to lose all protections for the less important temporary debt that you can pay at the end of the month? It seems like you're optimizing for the wrong things.

Apparently, this is the system favoured in US: make people depend on credit and add protections to offset the negatives that you mentioned.

End result: http://www.usdebtclock.org/

The US national debt has nothing to do with credit card debt.

Can you really say "nothing" with a straight face?

Reply on news.ycombinator.com