Avoiding Credit Card and Debit Card Fraud

By: Roger A Lee

Be careful where you use your credit card and your debit card. Debit card have different protections and insurance then does your credit card.

Most consumer protection laws and consumer insurance cover the use of credit cards but not debit cards.

Be a smart consumer and decide carefully which card you are going to pull out of your wallet.

Most of the major retails, such as Wal-Mart and Target, Home Depot and Walgreens have excellent computer security and privacy controls, but they are not as well protected as banks and financial institutions. Major retailers are prime targets for hackers and scammers.

If you are shopping at a major grocery chain, most likely your data is protected extremely well, but if it is a small local chain, they might not have the most technologically advanced security systems.

This past year hackers were able to get in and compromise Sony, if they can do that, what do you think they can do with a local grocery chain?

In the past few years hackers were able to break into the system of a northeast grocery chain and steal data on 4.2 million customers, more recently, hackers scored in Florida with a small chain of 106 statewide stores.

According to Beth Givens, director of the Privacy Rights Clearinghouse, debit card holders are at much greater risk from fraud than credit card holders. While credit card companies normally cover the costs of fraudulent charges, it can be much harder to convince banks to reimburse fraudulent withdrawals.

Government regulations and voluntary industry policies will protect you if a credit or debit card is used to make unauthorized purchases. But the protections for credit cards are much broader.

Credit cards. Under federal law, if someone steals your credit card you are only responsible to pay the first $50 of unauthorized charges. If you notify the issuer before the thief makes any charges, you may not be out anything. You are also free from liability if unauthorized purchases occur when the card is not physically present, say in an Internet purchase.

Zero-liability policies, like those offered by Visa and MasterCard, add a second layer of protection. Under these programs you won't pay anything if someone fraudulently uses your credit card online or off.

Debit cards. The rules are similar for debit cards, but there are a few restrictions. For example, your liability under federal law is limited to $50, but only if you notify the issuer within two business days of discovering the card's loss or theft. Your liability could jump to $500 if you put it off. And even this cap is lifted if you wait more than 60 calendar days from the time your bank statement is mailed.

Federal protections are a bit more generous if a thief just steals your debit card number (and not the actual card), but you still have 60 days after receiving your bank statement to report any unauthorized transactions.

The Visa and MasterCard zero-liability policies also apply to debit cards, but only to non-PIN transactions. If a thief steals your card and your PIN, the federal rules are your only defense.

Make sure your PIN number for your credit card and debit card are protected. This helps your liability issue.

Be a smart consumer; think before you pull out your card.

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Barry Norman is a contributor to and blogger at firstcredit.net. For over ten years FirstCredit.net has provided consumers free information helping them make sense of credit cards and the financial industry. Whether you are a longtime cardholder or looking for your first credit card, FirstCredit.net can help you make informed decisions.

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