Credit vs. Debit Cards: Which Offers Better Fraud Protection?

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Understanding Credit and Debit Card Fraud

At O1ne Mortgage, we prioritize consumer credit and finance education. This post aims to provide an objective view to help you make the best decisions regarding credit and debit card fraud. For any mortgage service needs, call us at 213-732-3074.

How Credit Card Fraud Works

Credit card fraud occurs when someone uses your credit card account—either the card itself or your card number and personal data—to make unauthorized charges or open a new account. If unauthorized charges appear on your account, your liability depends on when you report the loss or theft to the credit card company. Under the Fair Credit Billing Act, reporting the loss or theft before charges are made means you have zero liability. If you report after charges appear, your liability is capped at $50. Many credit card issuers offer zero liability protection as an extra measure.

How Debit Card Fraud Works

Debit card fraud has more severe consequences for your finances because your own cash is at stake. The Electronic Fund Transfer Act governs a consumer’s liability for debit card fraud. If you report the loss or theft of a debit card before unauthorized charges are made, you have zero liability. However, if you report after unauthorized charges are made, your liability depends on how soon you alert your bank:

• Within two days of fraud: $50 maximum liability
• Two to 60 days after fraud: $500 maximum liability
• More than 60 days after fraud: Liability for up to all unauthorized charges

Which Is Safer, a Credit Card or Debit Card?

Credit cards are generally safer than debit cards due to greater liability protection. You’re not at risk of losing money immediately from your bank account. However, there are circumstances when using a debit card can be just as safe and potentially more convenient or budget-friendly.

When to Use a Credit Card

• Purchase protection: Many credit cards offer purchase protection, which can help you get your money back if an item you bought is stolen, damaged, or not what you expected.
• Earning rewards: Credit card rewards come in the form of cash back, points, or miles, offering perks on everyday spending or travel.
• Making hotel deposits: Using a credit card for hotel deposits is more convenient as it prevents your bank account from being temporarily depleted.

When to Use a Debit Card

• Withdrawing cash: It’s more cost-effective to use a debit card at an ATM.
• Avoiding convenience fees: Some merchants charge a fee for using a credit card, which can be avoided by using a debit card.
• Limiting debt: Using a debit card ensures you never spend more than you earn, helping you avoid debt.

How to Protect Yourself from Credit and Debit Card Fraud

Take these steps to limit your exposure to credit and debit card fraud:

• Secure your physical cards: Keep your cards safe from theft by keeping them with you.
• Use contactless payments: Contactless payments are more secure than using a card’s chip or magnetic stripe.
• Watch your accounts: Regularly monitor your bank and credit card accounts and sign up for fraud alerts.
• Make use of card locks: Lock your credit or debit card if you’ve misplaced it to prevent unauthorized transactions.

The Bottom Line

Credit cards generally offer better fraud protection than debit cards, making them a safer choice. However, no matter which payment method you use, there are ways to protect yourself from fraud. Regularly checking your credit report is a crucial component in avoiding the stress and inconvenience of fraud.

For any mortgage service needs, call O1ne Mortgage at 213-732-3074. We’re here to help you make informed financial decisions.

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