Debit Card Fraud: Higher Risk than Credit Cards?
Debit card fraud can pose a big problem for customers who opt for this payment when making purchases. These cards are easy to use, but they carry substantial risks. If you are not careful enough and fall victim to fraud, you could face the consequences for years to come.
Debit cards have some personal safety advantages compared to credit cards, but they are overall riskier. What makes them a more unsafe form of payment, and what can you do to secure yourself?
Difference Between Credit Cards and Debit Cards
Let’s get some basics out of the way first. Even though credit and debit cards look alike, there are essential differences between them. For starters, credit cards have a credit line – a pre-set sum of money you can borrow from the issuer. As you make a purchase or other charge, your card issuer will pay the merchant. That sum subsequently lowers the amount you can borrow. To illustrate the point better:
If your credit line is $3,000 and you charged $1,000, you are left with $2,000 to borrow.
In case you pay back the $1,000 before the zero-interest period ends, your limit returns to the initial $3,000. If you, though, pay less than $1,000, then the sum you owe is transferred to the next month, but with interest.
Debit cards, on the other hand, have no borrowing attached to them. These cards are linked to your checking account. As a result, when you use a debit card, you tap into your pool of funds. And, logically, when you purchase with this card, the money goes from your bank account to the merchant. Each time you use your debit card, you will see the amount in your account fall down by the exact sum of the purchase. You are free to add money to your checking account whenever.
Debit Card Fraud Risks
It’s clear from the previous section that the biggest downfall is this: debit cards provide criminals access to your personal information, such as your bank account. That means that anyone with your card information can withdraw money from your account in no time. So, although having your debit card linked with your bank account offers many conveniences, it also leaves the window wide open to thieves.
There is a substantial difference between credit card fraud vs. debit card fraud regarding how much money you can lose if thieves get a hold of your information. If your credit card is lost or stolen, you can’t lose more than $50 in unauthorized transactions. And card issuers usually credit back the money back to you once the case gets resolved.
You can also challenge unlawful debit card use, but you should act quickly. If you contact the bank about a compromised card before someone uses it, you are not responsible for future transactions. If you wait a couple of business days, you may pay up to $50. In case you wait 60 days, the liability jumps to $500. If you pass the 60-day mark, your liability becomes unlimited, and you may risk losing the money forever.
The earlier you report the loss, the more you will limit it.
There is another disadvantage to debit cards. Your reimbursements can take up to a couple of weeks. Not only are you at risk of not having enough cash for everyday expenses, but this also stops you from paying your credit card and loan bills. That could setback your credit score.
Debit Card Advantages
Sure, debit cards lack some security areas, but there are compelling reasons to turn to them.
For starters, debit cards keep you from falling into overwhelming debt. If you are not careful when using credit cards, you can risk your credit score and overall credit health. High credit lines are more often than not the downfall of a lot of people.
By using a debit card for most of your purchases and charges, you can avoid this issue. Just be mindful of creating a budget, understand your cash flow requirements, and keep just enough money in your checking account to meet them. When you run out of funds, you can pull the lever and cease spending.
There is another advantage debit cards have over credit cards. They are financially more secure. Debit cards don’t incur a cash advance fee when you get money from your ATM. Credit cards usually have a 3-5% fee on the sum you take out. It will be added to the balance, and interest will begin accumulating straight away.
How to Keep Yourself Safe?
Here are some practical steps you can take to secure yourself:
● Please keep your card in a secure place at home when you’re not using it.
● Limit the fund you have in your checking account.
● Avoid using a debit card when ordering deliveries via smartphone.
● Opt for PayPal and similar services when paying for items via the internet.
● Guard the keypad of the ATM when entering the PIN.
● Check your accounts often.
An important thing to note is that you should avoid the overdraft protection option since it means your bank can tap into a linked source of funds if you exceed the sum you have in the checking account. That source may be your credit card or savings account. And that further means that a thief using your debit card can access both the checking account and the linked account.
Finally, a great way to secure yourself from debit card fraud is to talk to an educated credit specialist. Inform yourself about your best options, get a free consultation and learn how to protect your credit score. White, Jacobs and Associates has a team always on hand to help, inform, and give you your buying power back.