They're easy, convenient, and if you watch your balance, using a debit card instead of credit is a good way to manage your money. But the next time you swipe your debit card you may be handing over your bank account information to a thief.
Not all plastics cards are created equal. The major differences in credit vs. debit is in the protections (or lack of protections) that come along with the fine print. A debit card is connected directly to a person's bank account and when compromised can devastate your bank balance.
I know too many people who've fallen victim to some type of debit card fraud whether through skimming or unauthorized purchases and never recouped their losses. Sometimes the banks just won't budge. They tend not to believe a person who's PIN and card number was leaked.
The Federal Reserve's Regulation E (commonly dubbed Reg E), covers debit card transfers. It sets a consumer's liability for fraudulent purchases at $50, provided they notify the bank within two days of discovering that their card or card number has been stolen.TWO DAYS. That's it! After that, the maximum liability jumps to $500. Some banks will extend the grace period up to a year, but good luck getting your money back.
Federal laws limit cardholder liability to $50 in the case of credit card fraud, as long as the cardholder disputes the charge within 60 days. And if a victim doesn't discover or report the fraud until after 60 days have passed, the liability could be the entire card balance, for a debit or credit card. Once your debit card is compromised, you might not find out until a check bounces or the card is declined. And once you do recover the funds, the thief can just start all over again, unless you cancel the account altogether.
Don't use a debit card. Use credit cards and pay attention to your statements every month and refute unauthorized charges immediately. I check my charges online once every two weeks. If I'm traveling extensively, especially out of the country, I let the credit card company know ahead of time, so they won't shut down my card while I'm on the road.
Protect your identity.
Robert Siciliano Identity Theft Speaker discussing Debit Card Fraud on CNBC
Follow Robert Siciliano on Twitter: www.twitter.com/RobertSiciliano