Credit vs. debit card: Which one is bet­ter?

The Buffalo News - - BUSINESS -

My daugh­ter came rush­ing into my of­fice in de­spair.

She has a trip planned to Ireland in June. And the re­turn flight she’d booked back from Dublin on the Ice­landic bud­get air­line Wow Air had just been can­celed – after the com­pany an­nounced late last month with­out warn­ing that it had ceased op­er­a­tions.

She wasn’t just wor­ried about find­ing an­other cheap seat. She had used her debit card to pay for her air­line ticket. As a col­lege stu­dent, she couldn’t af­ford to lose the $350, she com­plained.

“I feel swin­dled,” my daugh­ter said. “How could the air­line take my money know­ing they may be go­ing out of busi­ness?”

Her mama went into pro­tec­tion mode – this time try­ing to help her fig­ure out how to get her money back.

I knew right away it would be dif­fi­cult to get a re­fund. Us­ing a debit card is like sit­ting in coach on an air­plane. It doesn’t come with the first-class perks of a credit card.

Wow Air’s col­lapse, while aw­ful for travelers who’d paid for up­com­ing flights, is a good op­por­tu­nity to re­mind you of the dif­fer­ence be­tween credit cards and debit cards.

If Amer­i­can con­sumers paid with a credit card for goods or ser­vices not re­ceived – such as a now-un­us­able Wow Air ticket – here are the pro­tec­tions un­der the Truth in Lend­ing Act, ac­cord­ing to the Fed­eral Trade Com­mis­sion.

Within 60 days from the date a bill was sent to them with the charge – whether or not you have paid it yet – con­sumers can dis­pute the item as a billing er­ror un­der the Truth in Lend­ing Act, says Ju­liana Gru­en­wald, a spokes­woman for the FTC.

“One im­por­tant note is that 60 days starts when the bill with this charge was/is sent to the con­sumer,” Gru­en­wald adds. She rec­om­mends the fol­low­ing lan­guage when dis­put­ing the charge: “The item was not de­liv­ered as agreed.”

Con­sumers should send a let­ter – cer­ti­fied mail if pos­si­ble – to the card is­suer’s mail­ing ad­dress for billing er­rors ASAP and be sure to keep a dated copy, the FTC ad­vises. If you are out­side the 60-day pe­riod, you should still try to con­test the charge as a billing er­ror.

In the case of Wow Air ticket hold­ers, “Some card is­suers might honor the dis­pute due to the high-pro­file na­ture of this prob­lem, and the air­line clearly de­faulted,” Gru­en­wald says. “But it might not work, and the card is­suer might say, ‘Sorry but you are out­side the dead­line.’ If [ticket hold­ers] al­ready paid (off their credit charges), they be­come es­sen­tially an un­se­cured cred­i­tor in the bank­ruptcy.”

And just be­cause you dis­pute a credit card charge doesn’t mean you get an au­to­matic re­fund. The FTC has ad­di­tional in­for­ma­tion re­lated to dis­put­ing billing er­rors when you pay

Us­ing a debit card is like sit­ting in coach on an air­plane.

with a credit card at www. con­sumer.ftc.gov. Search for “Dis­put­ing credit card charges.”

The rules gov­ern­ing your debit card fall un­der the Elec­tronic Fund Trans­fer Act. Un­for­tu­nately, if you pay with a debit card for a ser­vice or prod­uct that is never re­ceived, you are at the mercy of your bank.

“The Elec­tronic Fund Trans­fer Act does not in­clude ‘not de­liv­ered as agreed’ as a type of er­ror that can be chal­lenged for er­ror res­o­lu­tion,” Gru­en­wald said.

How­ever, you should still make an ap­peal to your fi­nan­cial in­sti­tu­tion, the FTC rec­om­mends.

For ex­am­ple, JP­Mor­gan Chase proac­tively sent a no­tice to its cus­tom­erser­vice rep­re­sen­ta­tives work­ing in its call cen­ters to alert them that Wow cus­tomers would prob­a­bly be call­ing to dis­pute charges or make re­fund claims due to can­celed flights.

“Credit card calls will go to the credit card dis­pute team, and debit card calls will go the debit card dis­pute team,” said Tom Kelly, a spokesman for Chase. “We will process the claims as ser­vices not re­ceived and sub­mit them to the bank or com­pany that pro­cessed the pur­chases for Wow.”

Kelly said that it’s “likely” that provisional credit given to its credit and debit card cus­tomers will be­come per­ma­nent over time.

It’s pos­si­ble that other cus­tomers who used a debit card could get their money back even if there is no fed­eral reg­u­la­tion re­quir­ing a re­fund. So, check with your bank, be­cause some­times they are more gen­er­ous than they have to be.

In my daugh­ter’s case, I urged her to call her bank, which im­me­di­ately gave her tem­po­rary credit for the $350. They told her it would take up to 90 days to con­sider her claim for a full per­ma­nent re­fund.

There are a lot of ad­van­tages to us­ing a debit card. But this sit­u­a­tion with Wow makes a good case for us­ing a credit card when book­ing an air­line ticket or mak­ing a ma­jor pur­chase.

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