Locks, alarm systems, man’s best friend, even security cameras and gates—you know the best ways to protect your home from burglars. But do you really know how to protect your bank account? Many people think they do, but considering the myths and poor information circulating around this topic and the constant evolution of digital theft, what you think you know might not really be practically effective. So how do you truly protect yourself from such fiscal thievery?
Many people believe the answer to be use of a debit card. Debit cards, they believe, have better fraud protection capabilities than do credit cards and are thus safer spending vehicles. But, since the safety of your money is far too important to rely on hearsay, what say we test the veracity of this belief ourselves?
To do so, let’s consider what would happen if someone managed to access your account, either by physically stealing your card or by intercepting your account information online.
If a thief got hold of your credit card information, he could rack up some serious charges on your account. However, all credit card issuers provide fraud protection guarantees that ensure you will not be held liable for unauthorized charges made with your card. This feature is usually called a $0 Liability Guarantee, and information about it can usually be found on your credit card agreement. For example, the following was prominently displayed under the heading “Did you know” on a Capital One credit card application:
“If your credit card is ever lost or stolen, you’re covered by $0 Fraud Liability protection against unauthorized charges. That’s peace of mind you can count on!”
Therefore, you aren’t ultimately on the hook for any fraudulent charges made by whoever accessed your card. The exact process you go through when dealing with credit card fraud differs on a case-by-case basis. In some cases, credit card companies notice fraud before you do, thanks to software that analyzes spending patterns, and block fraudulent transactions proactively. In others, you have to report charges that you did not make, and in all cases, you should report your card as lost or stolen as soon as you notice.
Whatever the case may be, you won’t be required to pay for disputed charges until your credit card company confirms your claim is legitimate. This prevents collateral damage as a result of credit card fraud. For example, since you’re not responsible for the disputed charges, you aren’t at risk of running out of money to pay for your other monthly obligations because of disputed charges.
Like with a credit card, you aren’t liable for any unauthorized charges made on your debit account. Just consider the liability statement found on the fine print of a Bank of America application:
“The $0 Liability Guarantee covers fraudulent purchases and payments made by others using your Bank of America credit and debit cards. To be covered, report purchases made by others promptly, and don’t share personal or account information with anyone.”
This just goes to show that credit cards and debit cards provide the exact same protections against identity theft and fraudulent transactions. So, whether someone physically gets their hands on your card or steals your information digitally, you aren’t out any money…in the long term.
As you probably know, when a purchase is made with a debit card, money is removed from the checking account tied to this card instantaneously. And while debit cards also have protections that block fraudulent transactions proactively, some unauthorized purchases might slip through the cracks. Thus, while you’re guaranteed to get your money back, the very nature of a debit card actually makes fraud particularly difficult to deal with in some cases.
For instance, if you don’t notice that money had been withdrawn from your account before you mail checks to whomever you owe monthly payments, you’ll have a mess on your hands. You’ll get your money back from your debit card provider, sure, but you will also have to go through the hassle of sorting out bounced checks and possible credit score damage incurred as a result of them.
Thus, while credit cards and debit cards technically provide equal fraud protection, credit cards actually make unauthorized transactions easier to deal with. The bottom line is that, no matter what type of electronic spending vehicle you use, there’s always a chance you could fall victim to fraud. Luckily, while you’re unlikely to be able to prevent a determined and capable cyber thief from accessing your accounts, you will not lose money because of it. Your bank might, but that’s what insurance is for, isn’t it?