I generally use only credit cards. Was thinking about getting a debit card. Since I carry a pretty high balance at the connected bank, am I taking a risk of losing a whole bunch of money if the card is stolen and/or I am somehow scammed?
Check with your bank to be sure, but financial institutions generally hold you liable for only a small amount (it was $50 last time I noticed) as long as you notify them as soon as you notice. In practice, my credit union reimbursed the entire debit the one time there was a fraudulent charge.
ETA: I just found this article from the Consumer Financial Protection Bureau that says you aren’t liable for anything as long as you notify your bank within two days of the charge or, if your card or PIN is actually stolen, as soon as the transaction appears on your statement.
I got mine ripped off once. The bank reimbursed me, but then they turned around and said I wasn’t allowed a debit card anymore. Lol
This was back when they were still new. Their policies have probably changed by now.
When my daughter’s debit card was compromised (twice!) last year, her account was frozen for the amount in question (which was all she had in it) until it could be straightened out. So she couldn’t access her money for a week.
I’m confused about the advice to always use a credit card as fraudulent charges on a debit card are not always reimbursed. At the same time, my debit card also works as a Visa credit card where it isn’t required I type in a PIN to approve a transaction. And the two times I’ve had fraudulent charges it has been no issue to get the charges reversed. Should the advice really just be ‘don’t use it as a debit, don’t enter a PIN, use as credit’ or that a debit card is truly different than a “pure” credit card?
The only real advantage of a debit card is for withdrawing cash. Otherwise the best solution is to get one or more reward cards and have it set up to have the bill paid by bank autopay in full every month.
I use a PayPal debit card linked to my checking account. I get 1% back on all purchases.
The rules vary between financial institutions and, more importantly, between different laws in different jurisdictions. There is, however, absolutely no such thing as “using a debit card as a credit card”. Don’t be misled by the fact that your debit card might have a “Visa” symbol. When you use a debit card without a PIN for small amounts via the contactless payment (“tap”) system, you’re absolutely still using a debit card and all the rules and potential vulnerabilities of debit cards still apply. Credit cards are entirely different instruments that are governed by the specific rules and liability limits of your credit card agreement and of applicable laws.
In general, in most cases you’re much better protected when using credit cards than with debit cards. As long as you notify the credit card issuer within the required timeframe of any suspected fraudulent transaction, the onus is on them to prove that it was legitimate. In the old days that would have been a verifiable signature on file; today that would be someone entering a valid PIN (which is why it’s so important to protect your PIN and make it non-guessable).
Based on advice I’ve seen from many different sources, I now no longer use my debit card for purchases. The reason being the above-mentioned protections if someone “skims” my card for fraudulent purposes. Which means I hardly ever use it at all, except for the occasional cash withdrawal and for banking at other than my home branch – today’s digital information world makes the whole concept of a “home branch” pretty much irrelevant.
Anecdotally, I’ve never experienced fraud on my debit card, although at least once (maybe twice?) I’ve found it to be disabled and when calling the bank, was informed that there was suspected fraud on some range of numbers that my card fell into, though not specifically my card, and was issued a new one. But I’ve heard from first-hand accounts as well as media horror stories about the difficulties of recouping funds lost due to debit card fraud. A friend of mine waited months to get back thousands of dollars lost due to debit card fraud. I’ve never had an issue with getting a disputed credit card transaction reversed.
You have more protection with a standard credit card. With a credit card, you are liable for no more than $50 in fraudulent charges, regardless of the total value. This is a federal law (15 U.S.C. § 1643).
The problem with a debit card is that there’s no law to protect your account from fraud. (At least I’m pretty sure of that.) You’re at the mercy of your bank and your bank’s policies to remedy the situation.
This is no longer true and hasn’t been for years. There is a difference in how much you are liable for if your physical card is lost or stolen, but if your account number is used and you still have the physical card then federal law protects debit cards the same as credit cards. Exactly what you are liable for legally is detailed here:
You’ll note that the first table is for “credit, ATM, or debit cards” without differentiation. Your bank may offer your protections beyond the law as well. The second table is for debit cards only, and pertains to the loss of the physical card.
I believe this has changed somewhere in the last 20 years, where debit card number theft used to be treated differently than credit card number theft, then the FTC changed some policy or something. I remember this happening, but can’t seem to find the date.
There are two ways using a debit card increases your risk: You’re more likely to physically lose it (where the higher liability may kick in) and if the number is stolen and used there will be a period of time from when it is stolen to when you get that money back. On the other hand, when a credit card number is stolen that is not actually your money, and you won’t actually lose the money yourself in the first place.
Not sure how the rules apply in the USA, but I’ve seen Canadian news stories where the banks have pushed back on reimbursements because “the transaction was done with a PIN, and you agreed to not share your PIN”. The banks seem to think that any purchase made with a PIN is valid unless/until you notify them the card is stolen or missing. However, shoulder surfing is a real thing. I’ve seen news stories about pinhole video cameras for capturing PINs too - combine it with a card skimmer and the scam artist has everything they need to drain your account. (At least, until ATMs are converted to chip readers.)
Theoretically there are limits to what can be withdrawn in cash each day and weekend and you can ask the bank to set these limits to what works for you. I’ve never looked into whether purchases can be limited, since I never use my card for anything except ATM withdrawals. I always use credit. (And pay the bill in full at the end of the month)
Plus, the latest bank gimmick is “tap” where a PIN is not needed. Supposedly this is a limited amount per transaction and per day, but it’s still money coming out of your account.
The biggest problem is - the money comes out of your account. Or as mentioned, your account could be frozen when you need it most. The nice thing about a credit card, you are not out of pocket while you dispute charges.
(The funniest ATM story I read was the guy who wheeled a fake small ATM into a mall and plugged it in. Over the course of a week, many people tried to use it and it simply said “transaction failed”. He retrieved it afterwards and had a full collection of ATM card data and PINs. Be careful where you use your debit card.)
Exactly. With a debit card, it’s your money or your ability to use it that is affected.
I would definitely not use a debit card linked to a bank account with a high balance.
One approach you can take is to have your bank set up a separate account that is linked to the debit card and then transfer small amounts into it when you need to make a debit card purchase.
This sounded very strange to me and the only similar story I could find had a lot more going on , so I don’t think anyone needs to worry that the bank will find them responsible because a shoulder surfer got their PIN and the card had not been reported stolen. However, if you give someone your PIN (like your child) and leave the card where they can get it, you will be out of luck.
Not sure if this is the one you’re thinking of, but something similar happened in the Buckland Hills Mall in Manchester, Connecticut, thirty years ago. Here is a story from AP News about the case.
FWIW, my reasoning for not using a debit card (out of concern for it getting stolen/compromised), isn’t so much about getting my money back, as I assume I get it back regardless. My problem is that I don’t want to be out of money and not able to pay for anything until then.
I would much rather someone max out one of my credit cards than drain my bank account.
Get an ATM-only card which can’t be used for purchases if it gets swiped
However, due to timing it can cost you more. I used to run debit card programs at a previous job; we had a customer who’s card was lost/stolen/compromised on, say, the 31st of the month. She had a bunch of bills set for auto debit on the 1st. Of course, there was no $ in her acct because it was taken the evening before. Her mortgage provider/landlord, car loan company, utility, etc charged her NSF/late fees because she didn’t have money in her acct on the 1st. We didn’t charge those fees so we wouldn’t reimburse them. All we would do is write her a “To Whom it may concern” letter confirming that her acct had been compromised.
Many places will give you one free pass per year. Had a problem six months ago, you’ve already used up your free pass. When you go on vacation this summer & forget to approve/authorize/pay a bill this summer, well you’ve already used up your free pass for the year so that’ll cost you. Credit cards are much better in that you don’t lose access to your money while fraudulent charges are being reversed.
We don’t have a debit card for our larger joint checking account. I have one for my own personal, much lower amount account. I typically only use it when we shop at Winco since they only take debit cards. We use credit cards for everything else. We’ve had them compromised a few times over the years but have never had to pay for any of those issues. And our credit card has fairly good benefits and cash back.
There’s also this - a credit card, but also apparently seems to be a shoulder-surf type operation.
The only place I ever used mine was Costco’s because that’s all they took. Now, however, they’re taking credit cards, so I shouldn’t even be carrying mine.I I think I’m going to put it in my dresser drawer.