The benefit of a magnetic fuse is that when the torpedo is detonated under the boat the full force of the blast is vented up into the ship, hopefully ripping out the keel and causing mass flooding.
Magnetic fuses were unreliable in the early days (Admiral Donitz issued a bad on their use even), also the magnetic fuse can be prematurely triggered in high seas. Another problem with high seas is that the the targets depth below water line is fluctuating meaning you may hit the hull or go too deep to trigger the fuse.
The impact fuse is given to not work at AOB over 60/120 I would suggest. I tend to use impact against convoys now, that way if you miss your original target you stand a chance of getting another ships (which could have a different keel depth). If it is a single target and the conditions are good I will use magnetic everytime. I also use impact against the big tankers because their depth below keel seems to be a function of payload and they have a horrible shaped keel with seems to screw me up quite a bit to!
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