It’s probably not a surprise that credit card fraud is a huge problem. In fact, the U.S. leads the world as the most fraud prone country for credit. (Of the total fraud losses in 2018, 38.6% occurred in the U.S.) Credit card fraud is the unauthorized use of a credit or debit card to obtain money or property.
With the continued rise in online shopping, cybercriminals are getting more sophisticated and even sharing their fraud malware online with other hackers. The FBI’s section chief of its cyber division, Herb Stapleton, explains “If we put up a wall, they’re building a ladder or a tunnel or a way to go around it.”
How you can protect yourself from fraud
The best thing you can do to protect yourself is to always shop with a credit card. Credit cards offer more robust fraud protection. That’s because different laws govern fraudulent purchases on debit cards and credit cards. Keep reading to find out more.
An explanation of liability
When it comes to fraudulent card transactions, liability is how much you personally will have to pay if your card information is stolen and used to make fraudulent charges. Even if your information is stolen through no fault of your own, you may be responsible for some (or all) of the charges.
The difference between credit cards and debit cards
Credit card purchases are protected by the Fair Credit Billing Act (FCBA), and the law is pretty straightforward. Debit card purchases are protected by the Electronic Funds Transfer Act (EFTA), and the law is more complicated.
This chart illustrates your maximum personal liability (the amount you would have to pay for any fraudulent charges) made on your card.
Personal Liability for Fraudulent Transactions
If you report your card lost or stolen before any fraudulent transactions occur
If you report your card lost or stolen within two days
(most are $0)
If you report your card lost or stolen within 60 days
(most are $0)
If you report your card lost or stolen after 60 days
(most are $0)
If your card information is stolen, but not your physical card
*If your debit card information is stolen, but not your physical card, your liability is $0 only if you report your information lost or stolen within 60 days of the statement date the first unauthorized transaction appears on. Otherwise, you are responsible for all unauthorized charges–even funds taken from linked accounts. Your liability in this situation is unlimited.
How could this happen to me?
There are hundreds of ways debit card fraud can occur. But here’s two:
An unscrupulous waiter snaps a quick photo of your debit card while he’s processing your bill. He may even come back to you and say there was an issue processing your payment, and he had to run two transactions. When those transactions show up on your statement, it doesn’t occur to you that one may be fraudulent; the descriptions are similar and the total of the two transactions adds up to about what you thought the bill was. Nothing else is amiss in your account for 60 days. Then, the waiter decides to finance his luxury vacation to the Bahamas with your card information. If you didn’t report your debit card information stolen within the first 60 days, you will personally have to pay for that vacation. Yikes!
You use your debit card to shop on a site that has an e-skimmer. Neither you nor the store can tell that anything’s wrong. Your debit card is compromised, and the thief creates one or two small charges (think $4.57 at your local coffee shop or $27.18 at a gas station or grocery store). If you don’t check your transaction list often or don’t see anything suspicious, you could easily get beyond the 60 day window again. Then, large, unauthorized transactions start occurring. A Macbook, an iphone, jewelry, and more. Unfortunately, you’re personally responsible for all of those charges–and you lose any money they’ve siphoned from your connected accounts, like your savings account. Double pain!
If you were to use a credit card instead of a debit card in the above examples, the most you would ever lose is $50. With a Spyn Card, it’s $0.