Most people tend to view all of the plastic in their wallet as essentially the same, using credit cards and bank ATM debit cards interchangeably. If you want to carry a balance or earn some points through your rewards program, you typically pay with a credit card. When you'd like to pay for your purchase and get some cash back, however, you use an ATM card that gives you the option to withdraw extra money.
These two kinds of cards represent dramatically different levels of liability, and the one you use can impact your vulnerability of becoming a victim of fraud. It's crucial to understand the differences and when to avoid using bank ATM cards.
Liability for Credit Card Abuse
Thanks to a federal consumer protection law, if your credit card is lost or stolen and somebody uses it to make purchases you did not authorize, then you are only liable for financial losses of a maximum of $50. This applies regardless of how much money was illegally charged to your card or how long it took you to report the fraud. Some credit card companies that really want to keep their customers happy will not hold them liable for that amount, and may waive the $50 fee. It's reassuring to know that if your credit card is stolen and used fraudulently, your losses will be limited to a max of $50.
ATM Card Liability
Different rules and regulations apply to bank ATM or debit cards. For starters, you only have two business days to report that your debit card has been lost or stolen, and if unauthorized purchases have appeared on your bill. If you fail to meet the deadline, your bank could hold you responsible for paying up to $500 in unauthorized charges. Worse still, if you don't report the loss or unauthorized use for 60 days, you may be liable for the entire amount stolen. Since that leaves you with no caps or limit on your liability, you could potentially have your entire bank account emptied out by a thief without protections. Many consumers keep all of their money in their checking account, and some even have their life savings deposited in the same account that's connected to their ATM debit card. In a worse-case scenario, victims could potentially be robbed of everything and left bankrupt.
You're probably beginning to see why it is really a good idea to use your credit card rather than your debit card for most purchases. Even though it can be really convenient to use an ATM card to make a purchase, you're probably better off using a credit card instead. There's another opportunity to be robbed of way more than $50 each time you use your debit card. Even if your bank provides fraud coverage, it may take a few weeks before you see your money again.
When Not to Use a Debit Card
There are some places where the opportunity is especially ripe for crooks to steal your ATM card or use skimmers to electronically harvest the confidential account information. To stay on the safe side, get into the habit of never using your debit card at the following places:
- Gas stations
- Retail and grocery stores
Use credit cards, not ATM cards, to shop both in stores and online. When you hand over your card at a restaurant to a server or bartender, you trust them to use it legally. Unfortunately, there are many confirmed instances where restaurant employees have been convicted of credit card theft. They simply copied the numbers off the card or swipe your card to pay for another table's tab, usually someone they know.
If you are traveling abroad, it is a good idea to check the local customs. In many places it is customary for the server to bring the credit card terminal to your table, and may never give your card to a server.
One final note worth mentioning; use your credit card to make security deposits or travel reservations such as booking a hotel, a cruise, or renting a car. Oftentimes these transactions can place a temporary hold on your funds or credit line. It's better to freeze a credit card account than to limit access to your bank account, which is why you should use credit cards in that type of situation.
Also, there are many credit cards with travel insurance and protections if you book your reservations using your credit card. These services are added benefits that are included with some credit cards and come with no additional expenses. These protections are only offered through credit cards, and do not cover any transactions or purchases made with other cards.
Credit cards can make quite a difference if you become a victim of fraud. Many consumers prefer not to use credit for their purchases, but you can use your credit cards for purchases and turn around to pay off that purchase with your bank account. Even if you pay it off minutes later, you're purchases and account are still protected.
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