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CNN Live Saturday

Which plastic is more cost effective?

Aired August 11, 2001 - 16:17   ET

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.

THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
DONNA KELLEY, CNN ANCHOR: When it comes to consumer spending, plastic is the American way. But which type of plastic is more cost effective? Credit or debit? CNN's Financial News reporter Valerie Morris adds up the differences.

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VALERIE MORRIS, CNN CORRESPONDENT (voice-over): These days, banks offer a rainbow of plastic designed for the consumer's convenience. But the level of protection can vary widely. Do you know which type of card is best for you?

FRANK TORRES, CONSUMERS UNION: If you're a consumer that pays off your credit card bills on time, without incurring any interest and you keep very low minimum balances, or perhaps no balances on your credit cards, then perhaps in lots of ways you're better off actually using a credit card than the debit card.

MORRIS: Here's why. When you return goods or cancel services purchased with a debit card, you're treated as if you used cash or a check, meaning you give up protections that come with certain credit cards such as automatic refunds for defective or broken goods. If the merchant agrees to a refund, it may take longer to credit your checking account.

Then there is liability for lost or stolen cards. Under federal law, if someone steals your credit card, you're only responsible for the first $50 of losses. With debit cards, liability is limited to $50, but only if you notify your issuer within two business days of discovering the card's loss or theft. If you don't, you're liable for up to $500 and if you fail to report it within 60 days of receiving your bank statement, you could lose all the money in your account.

Visa and MasterCard have voluntarily implemented a $50 liability limit on their debit cards, but consumer groups say card holders could still be hurt.

TORRES: If you have bounced a few checks, if you have been late on some payments because the money is so no longer in your account and it takes you a while to pay off your bills, you still could be held liable for those associated charges.

MORRIS (on camera): Financial planners say debit cards are great for smaller, cash and carry purchases. But for big ticket items or goods purchased site unseen, better to use our credit card. That is "Your Money." Valerie Morris CNN Financial News, New York.

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