Funny that this issue has come up a couple of times today. Both My Dollar Plan (25 Reasons to Love Credit Cards) and Blueprint for Financial Prosperity (Your Take: Why Use Debit Cards) wrote articles that touched on the lack of debit card fraud protection compared to credit cards.
I’m a little surprised that people are afraid to use a debit card due to fear of fraud or theft. According to Visa, you get the same fraud protection when you buy things with your Visa debit card-
*Visa’s Zero Liability policy took effect April 4, 2000, and is a great improvement on the previous policy. The former policy required that you report fraudulent activity within two business days of discovery. After this two-day period, you could be held responsible for up to $50 of the unauthorized charges. With the new Zero Liability policy, you’re no longer required to report fraudulent activity within two days and you’re not responsible for any fraudulent transactions made over the Visa network.
The Zero Liability policy covers all Visa credit and debit card transactions processed over the Visa network—online or off. The only transactions not covered under the Zero Liability policy are commercial card, ATM, and non-Visa-branded PIN transactions.
For transactions on other networks, the liability decision is left to the financial institution that issued your card. The issuer has the option of extending the same protections afforded by Visa’s Zero Liability policy.
You may also have more protection offered from your bank. I primarily use a WellsFargo Visa debit card right now and here is what they do on top of the Visa Zero Liability policy-
You won’t be responsible for promptly reported unauthorized transactions
You won’t be held responsible for any unauthorized purchases or ATM transactions, as long as they are reported promptly.
I don’t know. It seems pretty clear to me. I have no reason to be afraid of fraud when using my debit card (at least for CREDIT transactions). It is a little unclear what will happen to fraudulent PIN transactions, but that would of course require someone finding or stealing your card and knowing your PIN.
I had a fraudulent transaction once posted to my account via a stolen debit card number and I called the bank and had it removed (this was a smaller bank, not sure if it would have been better or worse with a big bank). It took about three days to clear up, so it is true that those funds were frozen during that time, but I was never actually at risk of losing the money. Sure, that was inconvenient, and I’ll give credit cards the advantage there, but are debit cards really that risky?
You may have other reasons for using a credit card over a debit card, rewards programs being the obvious number one choice, but I honestly don’t see the security risk. Am I missing something else?
By Eden, Fri 4 Jan 2008, 8 Comments, Categories: Credit Cards
January 4th, 2008 at 5:30 pm | Mrs. Micah said:
As I understand it I’m pretty well protected…unless someone gets my PIN I guess, but most people don’t know that. I don’t think anyone does.
January 5th, 2008 at 12:36 pm | RacerX said:
Certainly Debit cards are safer in one way…your finances! They offere the convenience, but not the potential pain!
Thanks for the mention in todays post as well. Nice Blog!
January 14th, 2008 at 8:06 am | Sarah Byrnes said:
Hi Eden – I just found your blog this morning, it’s really inspiring! I work for Americans for Fairness in Lending and wanted to thank you for posting our “Top Ten Tricks of the Lending Trade.” Also, we have a web page about the legal differences between credit & debit cards here, written by one of our Board members: http://www.affil.org/consumer_rsc/debit_cards.php. Laws actually require credit cards to offer more protections than debit cards are required to have. However, some banks may choose to offer more debit card protections than they are required to.
January 15th, 2008 at 8:57 pm | Eden said:
@Sarah – Thanks for stopping by. I found your site to be very helpful too. That debit cards link doesn’t seem to point to the article, but I will try to find it- I definitely want to read it!
May 29th, 2009 at 1:06 pm | biggie said:
Visa is not telling the truth. The rules for credit and debit cards ARE NOT the same. Debit cards DO NOT have the same fraud protection policy as credit cards AT ALL, not even Visa debit cards.
First, if you are the victim of credit card fraud, your credit card balance goes up until you dispute the charge, but you never lose any of your money.
But if you are the victim of debit card fraud, YOUR money is GONE. Your checking account is EMPTY. If you have any checks outstanding, they will bounce, and you’ll be charged fees for that. If you need to buy groceries, you can’t, because you don’t have any money.
Second, the conditions under which you can report fraud are much more restricted for debit cards. Even Visa will only help you with fraud if you notice and report it within 60 days. Don’t open and check your bank statement right away? Sorry, your money is gone forever.
Third, there are federal laws that limit your liability for credit card fraud to $50. There are no such laws for debit cards.
Debit cards are dangerous. They give you no advantages over credit cards and come with huge risk. Don’t let a debit card issuer’s website convince you otherwise.