Do 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, however, the card issuer has lost their money, which they’ve extended to you through a line of credit.
Handling credit card fraud is generally easier than handling debit card fraud because credit issuers have a vested interest in protecting their financial interests, whereas banks only hold 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 can 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.
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 are likely refer you to the fraud department, which can investigate from there and may request additional information.
They can 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 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 can 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 signing up for identity theft protection and set up fraud alerts with your bank.
When Should I Use a Credit Card?
Here are some instances when using a credit card may be a good option:
- Online Shopping: Credit cards or virtual credit cards can be a safer option for online shopping as they offer better fraud protection than debit cards. For example, if your credit card information is compromised, you can dispute the charges with your card company and not have to pay them while the issue is resolved. Also, some credit cards come with additional security features, like virtual card numbers or two-factor authentication, to further protect your information.
- Gas Pump: Gas pumps are a prime target for credit card skimmers, who can steal your card information. Using a credit card instead of a debit card can protect your checking account from fraudulent charges and the hassle of disputing them.
- Credit Score: Using a credit card responsibly can help improve your credit score. Making timely payments and keeping your balance low can demonstrate to lenders that you are a responsible borrower.
- Rewards: Many credit cards offer rewards or cash back for purchases made with the card. If you can pay off the balance in full each month, using a credit card for everyday purchases like groceries or gas can be a great way to earn rewards and save money. Just choose a rewards program that fits your lifestyle and spending habits.
To help avoid accumulating unnecessary debt, you should refrain from using your credit card for high-cost purchases. Additionally, using your credit card to withdraw cash or make cash advances should be avoided due to high fees and interest charges.
When Should I Use a Debit Card?
Here are some instances when using a debit card may be a better option than a credit card:
- Staying Out of Debt: Debit cards allow you to spend only the money in your checking account, making it easier to avoid overspending and getting into debt. With a credit card, spending more than you can afford and carrying a balance can be tempting, leading to high interest charges and debt.
- Need to Take Out Cash: If you need to withdraw cash, a debit card may be the best option, as it allows you to access your funds without incurring cash advance fees or interest charges. Use your debit card at a reputable ATM to avoid skimmers and other fraud schemes.
- Saving Money on Interest: Since debit cards don’t have an interest rate, you can avoid paying interest charges on purchases and save money in the long run. This can be especially helpful for larger purchases you plan to pay off over time, as you won’t incur interest charges like a credit card.
The Bottom Line
It’s essential to protect yourself from credit and debit card fraud. If you notice unauthorized charges on your credit card, report them immediately for a credit to your billing statement. Use credit cards for online purchases to avoid damaging your ability to pay other debts.
You can also use IdentityIQ services to monitor your credit and protect against identity theft. Stay vigilant and safeguard your finances to enjoy greater financial security.