Which Is More Secure for Holiday Shopping: Cash, Debit or Credit?

With the spike in cyberattacks that could allow unauthorized users to access sensitive information, some consumers are reassessing how they will pay for their purchases in the holiday season. One such notable attack that spurred consumers to reconsider was a data breach at Target in late 2013 that exposed the information of 110 million consumers. Of these records compromised, 40 million were credit and debit card numbers. With the higher chance of cyberthreats that could result in financial losses, some consumers may have a tough time deciding whether to use cash, debit or credit for shopping.

The use of debit cards is on the rise, especially among millennials. A survey by Bankrate found more than 6 in 10 millennials between 18 and 29 years of age do not have credit cards, with many preferring debit to credit. The survey noted millennials chose debit cards because they have similar advantages as credit compared to cash without having to fear going into debt. But is debit more secure?

Cash
With cash you do not have to worry about accumulating debt or spending too much of your bank account's balance. While younger generations are less likely to carry cash with them than past generations, there are key advantages to spending cash to make your holidays brighter. 

Pros

  • Use in budgeting strategies. While you could swipe credit or debit cards to pay for your holiday purchases, one budgeting approach many shoppers take is strictly using cash. In this way you can physically see how much you are spending rather than checking your credit card balance online. You could also divide how much you are planning to spend for all your holiday shopping between your loved ones evenly to prevent paying too much for any one person. 
  • Fewer cybersecurity concerns. Unlike debit and credit cards, you do not have to worry about someone hacking into your wallet when it only has cash. If thieves steal debit and credit numbers at a store where you paid cash, you will not be affected. However, there are also other issues with paying with cash. 

Cons

  • Once it's stolen, it's gone. Although there are plenty of reasons to just spend cash, it's less secure than paying with a debit or credit card. If you lose your cash to theft, you will have a harder time recovering it or getting reimbursed. 
  • Some consumers prefer to track spending online. Despite cash being a good way to rein in your spending, dealing with paper could also make it harder to monitor your budget's progress. While you could record your purchases using receipts for stores and ATMs, some people prefer tracking their money electronically. 

Debit
The Bankrate survey noted millennials prefer debit cards because they have similar advantages as credit compared to cash and here are some reasons why:

Pros

  • Limited liability. With debit, there are some consumer protections that could prevent you from being held liable for debit card losses. As soon as you suspect you are at risk for fraud due to a lost or stolen debit card, you should report your payment card missing. Depending on how soon you report the theft, you could face a maximum loss ranging between $50 to $500 if you report them between two and 60 business days, according to the Federal Trade Commission.
  • Banks could reimburse you for fraudulent charges. There is also the likelihood that banks will put back the money that was stolen from your account if you report funds stolen in time, which is similar to the benefits of owning a credit card.

Cons

  • Can be held liable for charges higher than $500. Although there are are some limits to your maximum loss if you report them promptly, you could face losses of your entire ATM/debit card account if you do not report them soon enough. The FTC said if you report a theft more than 60 calendar days after your statement is sent to you, then you could lose all of your money. 
  • Lose your PIN, lose money. Consumers who carry their PIN in their wallets could be at risk for identity theft if criminals get their hands on this key piece of information. 

Credit

One of the most popular options to pay for holiday shopping is using a credit card due to their perks and the opportunity to earn rewards. 

Pros

  • Zero liability. Compared to the amount you are held liable for with debit cards, you are less likely to pay for fraudulent charges on a credit card. Some payment companies offer zero liability for fraud as part of their credit card protection policies.
  • Maximum loss is $50. With credit cards, you may be liable to see losses up to $50, which is lower than with debit.

Cons

  • Hackers target credit card data. With swiping cards at point-of-sale systems in stores, your information is stored in retailers' computer systems. However, hackers could go after credit card data specifically.
  • Cybercriminals may sell credit card information. After criminals steal consumer credit card information, they may attempt to sell this data on black markets, which could put your financial accounts at risk. 

When thinking about the pros and cons of cash, credit or debit, consider the cost of the purchase you're paying for. Cash is great for small purchases, such as those for less than $5. However, for much larger purchases, you may want to use a credit or debit card for their fraud protection policies. While credit and debit both have benefits in guarding consumers against fraudulent purchases, credit may be the best bet for secure payment during the holiday season when consumers are spending on big-ticket purchases because of payment card companies' zero liability polices. However, it all depends on your preference and which payment method makes you feel safe the most.