Credit cards are the safest way to make purchases. Here's why.

The complaints from New York pile in by the dozens  this time of year at the Better Business Bureau. 

One of them accused an online Christmas tree vendor of failing to make its deliveries, leaving customers with phony tracking numbers instead. Another complained of a bicycle seller who didn't ship what was ordered, then tried to hack into a customer’s bank account. Then there was the one about the Instagram beautician, a slick operator who met clients through social media, charged them booking fees up front, then, according to the complaint, disappeared. 

In cases like these, consumer advocates said, customers who made their purchases with credit cards are likely to get their money back.

“When you use a credit card, it comes with additional protections,” said Claire Rosenzweig, who leads the New York BBB chapter that covers Long Island. “You have federal laws limiting your liability” from purchases that go wrong.

Despite transaction fees and high interest rates, credit cards have won over many experts as the safest way to shop. Unlike cash, gift cards and some “peer-to-peer” apps like Zelle, credit card issuers can insert themselves between buyer and seller to ensure fair transactions. It’s a role that becomes especially poignant during the winter holidays, when complaints to outlets like BBB’s Scam Tracker service tend to go up.

“Holiday time is emotional,” Rosenzweig said. “And scammers love emotional situations. They love to get you to act on impulse.”

How do those protections work? 

Say, for example, something you bought with a credit card was not delivered. The federal Fair Credit Billing Act  allows you to dispute that charge, blocking payment to the vendor until the credit card company can investigate and determine what happened.

“It can be difficult to persuade a business to simply refund your money,” said Melinda Opperman, a spokeswoman for the nonprofit credit counseling agency Credit.org. “But when you use your credit card, you don’t have to deal with the business any longer. You can let your credit card do that for you.

“And generally speaking, credit card companies side with the customers.”

A 2022 study by consumer credit reporting agency Equifax suggested that cardholders use this protection to their benefit quite often. It estimated that bank-initiated refunds, or “chargebacks,” are granted at a rate of one for every 65 transactions.

Besides resolving disputes, credit cards go even further to protect you. If your card is lost or stolen, for example, federal law limits your liability to $50, and according to credit reporting agency Transunion, many credit cards cut that liability to zero.

Meantime, many credit card issuers now offer additional purchase protections for recent purchases that were damaged, lost or stolen. Some of these protection plans will reimburse cardholders for lost or damaged items as far as 120 days after the purchase date. 

Many other methods of payment, including cash, checks and gift cards, do not provide these protections, Rosenzweig said.

Online payment systems like PayPal and Venmo do offer some purchase protections, however. And  debit cards provide  some of the same liability limits for lost or stolen cards, but those limits go up the longer you wait to report the loss. According to the Federal Trade Commission, debit cardholders’ maximum liability jumps to $500 from $50 if they wait longer than two business days to report a loss or theft of the card.

How do I ask for a refund? 

The FTC advises credit cardholders to contact their issuer if they have a problem with a recent purchase, which in most cases they can do by phone, mail, email or through the credit card's mobile app.  It even provides a sample letter that people can use as an example. The issuer must acknowledge getting your letter within 30 days, and it has 90 days to resolve the dispute. 

If you don’t like the cardholder’s decision, you can appeal its findings, though the FTC warns that the card issuer can begin collection procedures on the debt at this point if necessary. 

Consumer advocates say they instruct clients to do  research before opening their wallets to companies they don’t know. It's a good idea, they said, to look up a company's ratings and reviews on sites like BBB.org, and to check their physical addresses online to make sure there’s really a brick-and-mortar store where they say there is one. Finally, consumers should read their credit card’s terms and conditions to make sure they know what’s required in case they need to demand a refund.

“Know who you’re dealing with,” Rosenzweig said. “Then pay them with a credit card.”