Both Debit and Credit cards are a convenient way of making purchases without carrying cash around.  However, the main distinction between a debit card and a credit card is that credit cards are not linked to your bank account and is considered borrowed funds from the banks.  A Debit Card on the other hand is connected to your bank account and therefore every transaction you make gets taken out of your account immediately.

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Withdrawing Cash: Debit or Credit?

Most of us use our Debit Card as the default card to use at the ATM machine to obtain cash.  There are generally no charges to do so except if you are overseas where you need to watch out for the fees.  The two fees that apply when you withdraw cash during your travels are the withdrawal fee and the foreign exchange fee. Withdrawal fees vary from bank to bank. The foreign exchange fee also varies and would be in the range of 1%-3% of your withdrawal amount.

You can also use your credit card to withdraw cash from an ATM but you will be charged interest right away and they are normally much higher than a personal loan.

[Related: Credit card limit increased without asking? | Personal loan vs loan on credit card]

Buying online: Debit or Credit?

Many of us automatically think of credit card when buying online.  However, many banks in the UAE would also allow you to use your Debit Cards for online purchases.  But how does it differ?

Transaction wise, there is no difference, you get asked your card information and those banks who have secure code will send you a code through your mobile to use to complete the transaction.

How about online security?

Most of us are concerned about using our credit or debit card online due to scams, ID theft and frauds.  In 2013, the police seized 166 forged credit cards after raiding the apartment of a resident.  The suspects stole card information and made fake cards to be used for purchases.  In the last 5 years, 41% of Americans have faced credit, debit or prepaid card fraud.

Because you pay your credit card dues at the end of your billing cycle however, you may have the opportunity to verify transactions and dispute them if necessary, BEFORE you actually pay the bank back. With debit cards however, your transactions will be seen on your bank statement as a cash out from your bank account instantly.

It is critical to let the bank know as soon as you find out.  We spoke to multiple banks and they claim that it is the customer’s responsibility up to the time they let the bank know.  They would even expect you to pay the outstanding balance until the investigation has been completed which can take up to 180 days.

Dubai resident Angela, had a shock when a merchant forced a transaction on her old cancelled debit card.

“I had an online magazine subscription that I paid for with my debit card. A year later I decided not to renew my subscription but the merchant kept charging me anyway. I informed my bank and they cancelled the card, issuing me with a new one. The following month, the same amount was on my new statement.  When I check with the bank, they mentioned that it was on the old card and considered as fraud. The bank took responsibility but investigation is still under process and I am still out by AED 2,400.”

[Related: ATM fraud: Scams and how to stay safe]

How can you protect yourself against fraud?

From talking to a few retailers, most of the fraud were coming from international credit cards and required the companies to start filtering them by country.

So how do you protect yourself from others getting access to your credit or debit card details?

  • Don’t leave your phone unlocked with sensitive information such as credit card details
  • Don’t throw away papers with bank account numbers of credit card numbers on it
  • Don’t reply to an email for request of your banking details
  • If you are travelling and paying by credit card, always keep your eyes on the card
  • Draw a line on all blank spaces on your receipt
  • Make sure you take up the SMS service from your bank – this would let you know everytime there is a transaction on your debit or credit card

Having said that, there have been cases where customers have reported fraud to only find out that the transactions were made by a member of the family on a supplementary card or that the name on the statement does not match the public name of the merchant.