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Comment by FooBarWidget | Hacker News Reader

Why is using prepaid cards for online purchases fishy?

- Prepaid cards impose an upper limit on what can be spent, so that if the card details leak out you are protected against losing more money than is on the card. They can't plunder your entire bank account.

- Some people don't like the idea of having debt. By using a credit card you immediately have a debt whether you like it or not.

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By using a credit card you immediately have a debt whether you like it or not.

Credit cards are only debt if you treat them like debt. I use the shit out of mine, but pay the full balance pretty much every month. There's a lot of convenience, I'm fully protected from fraudulent activity, and I have a stupid amount of points/miles/whatever for free (or at least cheap) travel, to boot — I flew to .au a couple years ago for free on that basis, for example.

Your balance is irrelevant - your available credit line is debt, as at any moment you can be liable for up to that amount.

Your available credit line is not debt, and I can't recall ever hearing of anyone being held accountable for fraudulent purchases made against their account. Does this happen?

Credit card terms vary from country to country.

Here (Singapore) card conditions were recently changed so that you would only be liable for the first $100 of fraudulent transactions (assuming you can prove it wasn't you). I think the bank can still hold you liable for more if they find you were negligent about guarding your card details.

Prior to these condition changes, I remember being told by the bank that you would be liable for all charges incurred before you had reported the card physically stolen or lost.

In the US, you have zero liability for fraudulent charges made on your card without a valid signature, by law.

I wound up being held accountable for a small amount because I missed a deadline in the follow-up paperwork. So yes, it happens, but only when it doesn't matter much.

If I have a $10,000 credit limit and $0 balance, my debt is $10,000? At any moment I can be liable for up to $10,000? How does that work?

How does that work?

It doesn't. The GP comment is FUD.

It is, however, an element of your credit score.

In that your credit score has a factor of actual debt to total credit. Someone with $1000 of debt on $100,000 in credit is much better off than someone with $1000 of debt on $5,000 of credit.

So things like car loans and mortgages could be bad, since they start at 100% and go down.

Credit utilization is another element though. It's bad if you have too big a line of credit, but good if you have a historically low ratio of (debt/available credit).

If you're uninsured in the US and break your leg, yes, your debt is now $10,000.

...which is utterly irrelevant to credit cards.

Or much higher, but this is unrelated to credit cards.

"A credit card would give me the ability to instantaneously take on $10,000 in debt. I don't want this." is a responsible and admirable position for someone to take.

Agreed, but once again irrelevant, as that's not what anybody in this thread of conversation has said.

The debt argument is perfectly valid, but in the US, you're not liable for fraudulent charges on your credit cards. The maximum liability is something very small, like $50, but I've never had a bank hold me liable for a single penny in fraudulent charges. This is because the banks simply charge the fraudulent transactions back to the merchant. The banks are not on the hook for the money, so why would they care?

If you cancelled your credit card after the Linode breech, you potentially saved yourself some hassle, and you saved some merchant somewhere the trouble of a chargeback and lost merchandise, but that merchant wasn't properly verifying cards anyway, so it's still on them. You didn't save yourself a penny.

All of this assumes that all the cards were actually compromised. One report of suspicious activity -- no matter how tightly constrained this person was with their usage -- does not prove that CCs in the Linode database were compromised.

Personally, I don't really care. One of the great things about credit cards is that you're protected from fraud (no really, that's one of the big sales pitches they make). Linode says the cards were encrypted and the private key had a strong password. I have no impetus to inconvenience myself until there is some material reason.

What do you mean by "that merchant wasn't properly verifying cards anyway?"

If you know of some method by which merchants are able to reject fraudulent card use of the sort alleged to have resulted from the Linode breach, please do tell.

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