Which Protects Better: Debit or Credit Cards?

FOSTER CITY, Calif. — Consumers often ask whether debit or credit cards provide greater consumer protection against fraud. First, it’s important to know that consumers aren’t liable for unauthorized purchases. All major credit and debit card issuers provide $0 liability guarantees for unauthorized charges.

Also important is that 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. Credit 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.

Credit cards make breaches of financial security slightly easier to address. With a credit card, a consumer 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 the issuer of and have the charges removed from your bill. With a debit card, on the other hand, a thief could clear out your bank account before you notice. Although you will recover all of your money, finding your bank account empty can be quite a shock.

The real difference in financial security comes when you compare both credit cards and debit cards to cash. If a thief gets ahold of your cash, there’s really nothing you can do, save filing a report with the police. Cash doesn’t come with a liability guarantee, after all.

What about prepaid cards? 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.

Even if it doesn’t happen often, fraud can lead to considerable hassle and financial troubles, so make sure you continue to take steps to safeguard your personal finances. 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:

• Check your credit reports for inaccuracies. You are entitled to one free copy of your TransUnion, Equifax and Experian credit reports every 12 months. It’s a good idea to request your report from one of these agencies every four months to stay on top of changes.
• Keep your Social Security Number private. Make sure to give it out your 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.
• Make arrangements for your mail while on vacation. Mail overflowing from a mailbox is a sign of opportunity for both identity and property 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 financial information on “https” websites.

Source: PracticalMoneySkills.com

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