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Consumer reports of debit card, electronic funds transfer and ACH fraud were up 32% in 2020 compared with 2019, according to Federal Trade Commission (FTC) data. Finding unauthorized charges on your account can be upsetting, and resolving debit card fraud can be a headache. The good news is that regularly monitoring your accounts and taking other precautionary steps could help protect your money.
Pros and Cons of Using a Debit Card
Debit cards are tied to your bank account and let you make easy cashless and contactless transactions. Besides the convenience factor, there are other advantages of using debit cards—and a few disadvantages as well.
- No monthly bill: Each time you use your debit card, the purchase amount is deducted from your available balance, so you don't have to worry about paying a bill each month as you would with a credit card.
- Good for budgeting: Generally, what's available in your bank account is the maximum you're able to spend. Using a debit card with a limited balance when shopping could help you spend less money than you might with a credit card that has a high limit.
- Credit cards may be safer: Someone who gets access to your debit card could spend all of the money in your account if you don't spot the issue right away. Until the problem is resolved, you could be out of cash that you might need to pay bills. If someone makes fraudulent charges on your credit card, you haven't actually lost cash. All fraudulent charges likely will be reversed and the financial loss may be limited.
- Overdraft fees can get expensive: If you overestimate your account balance and spend more than you have available, you could rack up overdraft fees using a debit card.
What Is Debit Card Fraud?
Debit card fraud is when someone gets access to your debit card number or PIN and makes unauthorized purchases or withdrawals from your account. Here are some ways that debit card fraud might occur:
- A fraudster installs a card skimming device to a gas station fuel pump, skims your debit card information and uses it to drain your bank account.
- A service or repair person finds old statements in your home, steals your account number and racks up thousands of dollars in fraudulent charges.
- A thief distracts you while walking down a busy street, takes your bookbag and uses the debit card in the bag to go on an online shopping spree.
- You get an email that links to a fraudulent retail store where your debit card number is collected and used to commit fraud.
- A data breach happens at your bank and hackers run off with your personal data.
Debit Card Fraud vs. Credit Card Fraud
The financial ramifications of debit card fraud can be harsher than credit card fraud. That's why credit cards are often considered a safer option when making purchases online or while abroad.
Two federal laws—the Fair Credit Billing Act (FCBA) and Electronic Fund Transfer Act (EFTA)—set rules for what consumer liability is in the event of credit card or debit card fraud.
Under the FCBA, credit card users are only responsible for up to $50 in unauthorized credit card transactions. Meanwhile, liability for debit card fraud depends on how soon you report it.
Under the EFTA, if you report a debit card lost or stolen before someone uses the card, you're not responsible for any unauthorized transactions.
If you have not reported your debit card lost or stolen and you find unauthorized activity, here's what your maximum loss will be depending on when you report it:
- Report loss within two days: Up to $50
- Report loss from two to 60 days: Up to $500
- Report loss after 60 days: You could be responsible for all money taken
As you can see, it's crucial to keep tabs on your bank account so you can report fraudulent activity right away. If you're a victim of fraud, the FTC recommends calling your bank and also following up with a letter or email that details each fraudulent transaction.
How to Prevent Debit Card Fraud
When it comes to protecting yourself from debit card fraud, the best offense is defense. Staying on top of your accounts can help you quickly catch transactions that look out of place so you can minimize your financial loss.
Here are steps you can take to protect yourself:
- Review your statement each month. Online bank accounts typically offer a transaction log where you can regularly review your purchases, but it's also worthwhile to run through your statements each month to see if you missed any unusual activity. If you find a questionable charge, be sure to contact your debit card issuer immediately.
- Keep statements in a safe place. Physical statements you decide to keep should be put somewhere safe. Shred statements that you don't need.
- Keep tabs on your debit cards. Since so many transactions today happen virtually without an actual card swipe, you might not use your physical card on a daily basis. Keep track of which wallet your cards are in so they don't fall into the wrong hands. If you lose a card or think it may be stolen, report it right away.
- Be careful about where you store your data. Avoid storing your debit card number or PIN on your device or sending it through email. If someone gets access to your phone, computer or email, they could have all the information they need to take money from your account.
- Protect your debit card when shopping online. Scrutinize online stores before shopping because scammers can set up shops with bad intent. There are several precautions to take when making online transactions:
- Before entering debit card information, make sure there's an "https" (the "s" means secure) before the website name in the address bar and that there's a padlock icon next to it.
- Watch out for phishing scams, which often come in the form of fraudulent emails pretending to be from banks or retailers.
- Only give a business your debit card number if there's a valid reason and after you've determined that the company is reputable.
- Consider paying with a third-party payment service like PayPal when paying online since the recipient never sees your account information and you may be covered by purchase protection.
- Avoid making purchases on unsecured networks.
Stay Vigilant to Prevent Debit Card Fraud
While you may not have the power to prevent big data breaches or theft fully, early detection of fraud can help minimize loss. Being hypervigilant could pay off if you catch fraud before someone is able to take off with a large sum. Review your bank accounts regularly and call the number on the back of the card if you identify unauthorized transactions.