Do credit or debit cards offer better fraud protections?


Q. What’s the difference between a debit card and a credit card when it comes to fraud protections?
— Asking

A. We’re glad to see you know there are differences. Here’s how it works.

The difference between fraud protection consumers receive with a debit card compared to a credit card depends on which party – you or the card company – takes the initial responsibility to get the money back, said Niraj Chhabra, a certified financial planner with Ameriprise Financial Services in Cedar Knolls.

“With your debit card, you are using your own funds. With a credit card, you are using theirs,” Chhabra said. “Whoever’s money was stolen has the greater responsibility to get it back.”

Chhabra said debit card withdrawals are taken from your account, so it’s possible for you to be fully liable.

“According to the Electronic Fund Transfer ACT (EFTA), how much you owe is directly correlated to how long it takes for you to find the fraudulent activity,” he said.

If you find it within two business days, you are responsible for up to $50. If you catch it within 60 days, you’re responsible for up to $500. After that, the responsibility of getting your money back falls on your shoulders, he said.

When you use a credit card, you are technically borrowing the company’s money, and then paying them back, Chhabra said.

“Dispute settlement procedures for credit cards is governed by the Fair Credit Billing Act (FCBA) which limits your personal liability to $50 – although many cards offer 100 percent protection,” he said. “Once you report the fraud, the credit card company will generally take responsibility for getting the money back.”

Chhabra said in his experience, most people check their statements once a month.

But he recommends you monitor card accounts – in addition to your other financial accounts – more often.

“Monitoring your financial activity regularly may not only help you identify fraud, but it can also help you be mindful of your spending patterns,” he said.

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