If you typically use a debit card for online purchases, you may want to reconsider. If your card information is hacked and purchases are made without your permission, you’ll quickly find out that debit and credit cards are treated quite differently.
The key difference: With a credit card, the card issuer must fight to get its money back. With a debit card, you must fight to get your money back.
How fraud is handled
If card information has been stolen and potentially fraudulent transactions have been made, two laws protect your rights. For credit cards, the primary law is the Fair Credit Billing Act, or FCBA. For debit card transactions, the Electronic Funds Transfer Act (EFTA) applies. While these laws offer some similar protections, knowing the differences is key to understanding why it’s safer to use one type of plastic than the other.
Debit card fraud
According to the EFTA, your potential liability for fraudulent debit card transactions is virtually unlimited. You have up to 60 days to report a lost or stolen card under the EFTA. After that, you simply lose whatever money was taken, even funds siphoned from linked accounts. The exact liability limits under the EFTA are:
Lost or stolen card reported before unauthorized transactions: zero liability.
Lost or stolen card reported within two days: $50 liability limit.
Lost or stolen card reported within 60 days: $500 liability limit.
After 60 days: no protection.
It’s important to note that if your card is not physically lost or stolen, you have 60 days to report fraudulent transactions with zero liability. If only your card number is stolen, the 60 days start from the date of the statement on which a fraudulent transaction appears.
Credit card fraud
Under the FCBA, your maximum liability for fraudulent credit card transactions is $50. If you report your card lost or stolen before any fraudulent transactions occur, your liability is zero. Many credit cards promise zero liability for all fraudulent transactions.
“I’ve had my credit card information stolen and used fraudulently a number of times,” says Tucker Spillane, a 24-year-old credit analyst from New York. “Fortunately, my issuer almost always picks up on it right away … usually because the activity is considered abnormal from my typical spending habits. And they provide their own fraud coverage anyway. I’ve never had to pay a dime.”
The real difference between a debit card and a credit card when it comes to fraud is in how you get your money back. When a fraudulent transaction occurs on your credit card, you have lost no money. You can report the fraud, get a credit on your statement, and the issue will never affect your bank account.
With a debit card, your bank account balance is affected from the moment the fraudulent transaction takes place. If the transactions are significant, you could experience a domino effect of financial…