Did you know that how you dispute fraudulent charges on a debit card is different than on a credit card? Consumer protection laws differ in each case and knowing the differences can help to keep your accounts safe from identity theft.
Mainly, if you need to dispute a fraudulent debit card charge, the funds you lost were yours only. In the case of a fraudulent credit card purchase, the card issuer has lost their money, which they’ve extended to you through a line of credit.
Handling credit card fraud is easier than handling debit card fraud because your credit issuer has a vested interest in protecting its finances, where a bank is only holding the money that you already possess.
If you frequently use your debit card online, you may want to reconsider. While there are protections for both, you’ll face more liability for fraudulent charges than if you’d used your credit card instead.
Consumer Protection for Debit Card Transactions
Consumers who use debit cards are protected by the Electronic Funds Transfer Act (EFTA).
This law lays out the liabilities of the consumer as follows:
If a lost or stolen debit card is reported to the financial institution before any fraudulent purchases can be made, the consumer faces no liability.
If a lost or stolen debit card is reported within 48 hours, the consumer’s liability for any fraudulent transactions is limited to $50.
If a lost or stolen debit card is reported after 48 hours but within 60 days, the consumer’s liability is limited to $500.
If a lost or stolen debit card isn’t reported within 60 days, the consumer is liable for any and all fraudulent charges incurred. This includes all money drained from the debit card account, any overdraft fees, and money taken from any accounts that are linked to the debit card account.
If a debit card was not lost or stolen, but its number was stolen and used for a fraudulent transaction, the consumer has 60 days to report the charge with no liability. The 60 days begins on the date the consumer receives their statement with the fraudulent transaction.
How to Dispute Fraudulent Debit Card Charges
If you notice an unauthorized transaction in your debit card account, immediately contact the business where the transaction occurred, and tell them the charge was unauthorized. Merchants want to keep their customers happy and avoid chargebacks from the bank, so it’s worth asking if they’ll refund you for the charge. They may work with you to investigate the fraud and generate a report for the police.
Then, call the customer service number on the back of your card, and explain the situation. They’ll likely refer you to the fraud department, which will investigate from there and may request further information. They’ll advise you on your next steps. It’s also recommended that you get everything in writing-the Federal Trade Commission provides a sample letter you can fill out and send to your bank.
Check all of your accounts to make sure no others were compromised. Change your PINs, online banking passwords, and keep a close eye on your accounts.
Consumer Protections for Credit Card Transactions
Credit card users are protected by the Fair Credit Billing Act (FCBA). Similar to the EFTA, this law ensures that if a consumer reports his or her credit card missing or stolen, they face no liability for any fraudulent charges thereafter.
However, the FCBA also states that consumers’ liability cannot exceed $50 for any fraudulent credit card transactions. If the physical card was not lost but its numbers were stolen and used, the consumer faces no liability. Additionally, many financial institutions offer credit cards that guarantee zero liability for any fraudulent transactions.
The FCBA also protects consumers in the following situations:
- An item ordered online or otherwise for delivery never arrives
- An item that was purchased is faulty or not the same as what was ordered
- Any case in which the consumer was charged too much for a product.
How to Dispute Fraudulent Credit Card Charges
If your credit card number has been compromised and you notice an unauthorized charge, report it to the business where the charge occurred. Then, immediately report it to your bank in order to make sure you aren’t liable for up to $50.
Your credit card issuer will send you a new card with a new number and investigate the disputed charges immediately. Again, check all accounts to make sure no others were compromised, and change all PINs and banking passwords as soon as possible.
Order your credit report to make sure there is no additional fraud such as credit cards being opened in your name. If you notice any pattern of fraudulent activity or billing inconsistencies, file a police report.
After you’ve filed with the police, contact the three major credit bureaus to request a credit freeze and put a fraud alert on your profile. Consider subscribing to credit and identity theft monitoring services and set up fraud alerts with your bank.
The Bottom Line
In the case of an unauthorized credit card charge, fraud should be reported immediately. You’ll receive a credit to your billing statement before the next billing cycle.
In the case of debit card fraud, the money is lost entirely. It may take your financial institution weeks to investigate. When it comes to financial fraud, it’s safer to use credit cards online in order to avoid a financial situation that could damage your ability to pay your other debts.