Credit, Debit and Fraud Protection
Consumers often ask whether debit or credit cards provide greater consumer protection against fraud. The question itself indicates a few key preconceived notions about fraud as it relates to personal finance; as a consumer, it’s important to know that:
- You aren’t liable for unauthorized purchases. All major credit and debit card issuers provide $0 liability guarantees for unauthorized purchases.
- Fraud isn’t all that prevalent. Of all the purchases made with credit cards and debit cards, only around 0.05% are affected by fraud.
Yet it’s understandable that consumers are concerned about the security of their hard-earned money, and many may still want to know: will using either a credit card or a debit card make dealing with fraud easier?
Credit or debit?
Credit cards make breaches of financial security slightly easier to address. With a credit card, a consumer usually has at least 21 days from the time a statement is available to pay the amount due. That’s plenty of time to notice unauthorized charges, notify your issuer of the issue, and have them removed from you bill. With a debit card, on the other hand, a thief could clear out your bank account before you notice. Although you will recover your money, finding your bank account empty can be quite a shock. You should read your individual’s financial institution’s fraud protection policy for the exact details regarding your credit and debit cards.
What about cash?
The real difference in financial security comes when you compare both credit cards and debit cards to cash. If a thief steels your cash, there’s really nothing you can do other than filing a report with the police. Cash doesn’t come with a $0 liability guarantee.
What about prepaid cards?
Let’s cover all the bases. In terms of liability, prepaid cards are similar to debit cards. The primary difference is that instead of being linked to a bank account, a prepaid card is linked to a reloadable prepaid account. This is only for the Visa and Mastercard prepaid cards. Retail store prepaid cards are a lot like cash. Refer to your individual prepaid card disclosures for complete details.
How to protect yourself.
There are a few steps you can take to further insulate yourself from financial intruders, no matter how you choose to go about spending your money. It is always good practice to:
- Check your credit reports for inaccuracies. You are entitled to one free copy of your TransUnion, Equifax and Experian credit reports every 12 months.
- Keep your social security number (SSN) private. Make sure to give out your SSN only to reputable companies after you have contacted them, not after they have contacted you.
- Shred financial documents. Dumpsters are a main source of information for identity thieves.
- Use secure passwords. Avoid opening up your financial world to anyone who knows your pet’s name or your birthday, and make sure to change your passwords regularly.
- Verify web security. Only provide personal information on "https" websites.
Credit cards and debit cards have far greater purchasing power than the cash you carry in your wallet, yet they also offer considerably lower liability than other forms of payment. However, fraud can lead to considerable hassle and financial troubles, so make sure you continue to take steps to safeguard your personal finances.