> If you don't and then try to make a transaction, you get whacked with penalties etc.
No you don't. Your card just gets declined.
This seems like a weird argument anyway. Sure, in some cases you will get hit with credit card fraud and will also at that time have no further available credit, and no cash on hand. But I expect that's the exception, not the rule.
If we're talking about debit card fraud, every single time that happens, the money will be gone while you're waiting for the dispute to be resolved.
Credit cards work how your agreement says they work. If you exceed your credit limit they can offer to extend you more credit but charge you a fee/penalty for doing that. Conversely, you can have a bank that will decline debit transactions instead of extending overdraft protection.
Credit card companies are less likely to extend overdraft protection, because if you're already at your credit limit they may not want to risk lending you even more money, but that's why there's typically a fee to offset the risk when they do offer it.
> If we're talking about debit card fraud, every single time that happens, the money will be gone while you're waiting for the dispute to be resolved.
The amount of money you have available to you is the sum of your positive balance and your available credit. If you have $1000 in available credit and $1000 in your bank account, you can spend up to $2000. If you have to dispute a new $100 transaction, you can now only spend $1900 more dollars until the dispute resolves, regardless of whether the dispute was on your credit card or your debit card.
And even if you hit your credit limit, the money is still in the account, so you can spend it -- just not by using your credit card -- but you can still go to the ATM and get cash, for example. You cannot spend it when fraud happens with a debit card.
You can very much get a cash advance against a credit card, if you require physical cash. But that's an extremely unusual outlier anyway -- needing enough physical cash that it exceeds the balance of your bank account. If you had a $1000 balance and then have a $100 dispute and have to immediately make $1000 in payments, you don't need a cash advance unless over 90% of the payments are required to be in cash, because the remainder can be on credit.
No you don't. Your card just gets declined.
This seems like a weird argument anyway. Sure, in some cases you will get hit with credit card fraud and will also at that time have no further available credit, and no cash on hand. But I expect that's the exception, not the rule.
If we're talking about debit card fraud, every single time that happens, the money will be gone while you're waiting for the dispute to be resolved.