Not all plastics cards are created equal. The major differences in credit vs. debit is in the protections (or lack of protections) that come along with the fine print. A debit card is connected directly to a person’s bank account and when compromised can devastate your bank balance.

I know too many people who’ve fallen victim to some type of debit card fraud whether through skimming or unauthorized purchases and never recouped their losses. Sometimes the banks just won’t budge. They tend not to believe a person who’s PIN and card number was leaked.

Creditcards.com reports The Federal Reserve’s Regulation E (commonly dubbed Reg E), covers debit card transfers. It sets a consumer’s liability for fraudulent purchases at $50, provided they notify the bank within two days of discovering that their card or card number has been stolen. TWO DAYS. That’s it! After that, the maximum liability jumps to $500. Some banks will extend the grace period up to a year, but good luck getting your money back.

Federal laws limit cardholder liability to $50 in the case of credit card fraud, as long as the cardholder disputes the charge within 60 days. And if a victim doesn’t discover or report the fraud until after 60 days have passed, the liability could be the entire card balance, for a debit or credit card. Once your debit card is compromised, you might not find out until a check bounces or the card is declined. And once you do recover the funds, the thief can just start all over again, unless you cancel the account altogether.

Don’t use a debit card. Use credit cards and pay attention to your statements every month and refute unauthorized charges immediately. I check my charges online once every two weeks. If I’m traveling extensively, especially out of the country, I let the credit card company know ahead of time, so they won’t shut down my card while I’m on the road.

Protect your identity.

1. Get a credit freeze and follow the steps for your particular state. This is an absolutely necessary tool to secure your credit. In most cases, it prevents new accounts from being opened in your name. This makes your Social Security number useless to a potential identity thief.

2. Invest in Intelius identity theft protection and prevention. Not all forms of identity theft can be prevented, but identity theft protection services can dramatically reduce your risk. (Disclosures)

Robert Siciliano Identity Theft Speaker discussing Debit Card Fraud on CNBC

Tags: intelius

0 members like this

Comment

You need to be a member of Geeks to add comments!

Join Geeks

Comment by gypkap on March 31, 2010 at 8:48am: Mr. Isherwood: if you can possibly do so, switch to a credit union. B of A (and other banks) charge a lot for many transactions, and credit unions don't.

Comment by benalox on March 31, 2010 at 8:43am: I think Visa and Mastercard debit cards should emulate what the Chinese Union Pay Debit cards are offering. The card is link to your bank account but the card itself is protected with a PIN. Then upon making payment, you have to sign the slip to match the card. Lastly when the payment is processed, the bank will send you an SMS telling you that a payment has been made. You got to give it to the Chinese, it may be a troublesome approach but it sure is worth the security.

Comment by JS on March 31, 2010 at 8:32am: The thing with Debit cards is, over here, in Estonia, everyone, and I mean every single person uses them. You can use one everywhere. ATMs/Cash machines are available on nearly every corner and near every shop or block of shops. Security cameras accompany ATMs, and people are regularly warned to check ATMs and cover their PIN number.

You can also pay at the stores using debit cards (any store, it seems, nowadays, even really small ones). I've actually seen salesmen walking around with wireless debit and credit card payment systems.

And it works around here. Not having a debit card is almost seen as weird.

Comment by Robert Siciliano on March 31, 2010 at 7:45am: The fact is when your debit card is compromised the bank tends not to believe you. People are often denied claims based on banks not believing the victims or adhering to the "2 day to respond" law.

Comment by cliffystones on March 31, 2010 at 7:13am: bob3160,

While $50 may be the liability limit, my point was that if the account was my only source of funds then I would be in a world of hurt until the bank restored my funds. As Robert Siciliano stated, it can take some time to get those funds restored. While you may be able to make arrangements with your landlord, mortgage company, auto loan provider, etc., it would suck to have to depend on friends and relatives for groceries and gas until the next paycheck.

The point is, IF you can swing a credit card you're probably more secure. Your bank account definitely is. If you can't get the credit card then you need to be (as others have stated) a watchful consumer and practice a little more "c-y-a".

Comment by bob3160 on March 31, 2010 at 7:03am: Your at risk liability is $50.00 so the myth of "Them" cleaning you out isn't a reality.

Comment by Phoobar on March 31, 2010 at 6:56am: In this economy...you may have no other choice. Debit cards are less safe...but when you consider the trips across town to get cash from an ATM without paying fees & no annual fees (which add up to huge amounts soon). Being able to save up the money for big purchases in your savings account...then pulling the money into your checking account before going to make the purchase...you are not taking a chance in getting over your head with credit card debt.

As long as you check your balance at least once a day (I do it at least twice a day)...you can't have the problem of them draining your checking account. It's called due diligence. Not doing it...you deserve to lose your money.

Comment by cliffystones on March 31, 2010 at 6:42am: Great advice!

What's worse is those "Visa Check Cards". When those first came out, the bank automatically sent us check cards to replace our ATM cards. I started reading the fine print, and the only "improvement" (or lack thereof) was that you didn't have to enter a pin number to access your account.

I called the bank and asked them what would happen if my card was lost and my account was drained of funds. I got the "you're protected" line, and then asked how I went about getting my stolen money back. This question was followed with the classic "you need to write a letter to the bank", yada, yada, yada. I asked the representative, "If I lost my card getting gas this morning (it's happened to me once), and some clown wiped out my bank account by lunchtime, how in hell was I supposed to pay the mortgage, buy groceries, etc. while waiting for the bank to get around to reimbursing me!" She agreed that it would be "less convenient" and sent me a standard ATM card to replace the "check card".

I only use my ATM card to make deposits and to get cash (from my own bank to avoid being charged). I use a credit card, which also has no annual fee and 1 to 3% rewards for everyday purchases. I pay the balance in full every month.

For those of you who say they don't qualify for a credit card, I would suggest shopping around a bit more. It might be possible to get one with a lower limit. Worst case, use an ATM card that requires a pin number, and avoid "check cards" like the plague!

Comment by bob3160 on March 31, 2010 at 5:11am: Nothing wrong with debit cards if used properly.
I enjoy the rewards of a 1% cash back when using my paypal debit card.
When your on a fixed income, every little bit helps.

Comment by wm isherwood on March 31, 2010 at 4:18am: I have used my debit card for years. When I charge something the bank sends me an email notifying me that it was used and what for so I know in minutes that it was used.
Since I live on Soc. Sec. I don't qualify for a credit card. Not enough income!
I use Bank of America.

RSS

Badges | Report an Issue | Terms of Service