Why Your Spending Vehicle May Leave You Vulnerable to Fraud

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.

Credit Card

MasterCard credit cardIf 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.

Debit Card

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?

photo credit: Håkan Dahlström

1950 vs Today: Have Our Changed Spending Habits Improved Our Lives?

When you think of the 1950s, do you think of an idyllic happy time?  Or do you think of it as an unexciting period in our country’s history?  There have been numerous changes in our society over the last 50+ years.  Many believe these changes have led to an easier and overall better way of life for each of us.

Incomes are up!  But, so is spending.  According to the Bureau of Labor Statistics, spending in America has increased tenfold since 1950.  That increased spending means that not only are Americans saving less, in many cases they are over-extending themselves and living on credit (aka, living in debt).

So, if we are making more money than ever before, why does life suddenly seem so expensive?

Let’s compare….

According to data released by the U.S. Census in 2007, there are three key areas that are draining our wallets.  And each of these four categories has changed dramatically in the last 50+ years.

HOUSING (up 21% since 1950) – In 1950, housing accounted for 22% of a family’s spending.  In 2007, housing costs had risen to 43% of spending.  Why?  Since 1950, the average house size has doubled, now standing around 2,200-2,400 square feet.  In 1950, it was common for houses to have one bathroom, for kids to share bedrooms, and for closets to be rather small (and since people had less ‘stuff’ the small closets seemed ample at the time).  Now, houses have more bathrooms than bedrooms and walk-in closets that are the size of many smaller bedrooms in a 1950’s house!  Many families of today could not imagine raising a family in the house their parents grew up in.  But the truth is, millions of families lived in those houses and survived!

TRANSPORTATION (up 3% since 1950) – In 1950, transportation accounted for 15% of spending.  In 2007, it was up to 18%.  In 1950, it was common for a family to have just one car.  And while cars have actually come down in price (when adjusted for inflation), families now have multiple cars.  And although cars are much more fuel efficient today than they were 50 years ago, Americans are driving many more miles in a year than ever before.

RECREATION, COMMUNICATION AND EDUCATION (up 10% since 1950) – In 1950, this category accounted for 2% of spending.  In 2007, it accounted for 12% of spending.  And while increased educational opportunities are partially responsible for this increase, the bulk of the increase can be attributed to cable, Internet, and phone fees.  Items that we consider a necessarily part of life – cell phones (with data plans!), cable, Internet – were non-existent in 1950.  How much does your house spend each month on cell phones, cable, and Internet?  We think we need those services, but the truth is people have lived without them in the past.  These pricey ‘wants’ have, over time, become perceived ‘needs’ in our society.

As these figures show, the little conveniences that we think make our lives so much improved from our 1950s counterparts are actually making us poorer!  Some say all these pricey improvements mean we are better off.  But are we really better off if we are saving less and going into debt?  You decide!

Want to Write for Beating Broke?

I get requests all the time from people who want to submit a guest post, here on Beating Broke.  Of course, I do accept guest posts, but I thought it might be time for a more formal set of submission guidelines.

The result is the Write for Us page.  You’ll find guidelines for submitting a guest post on Beating Broke as well as guidelines and instructions for applying to become a contributing writer.  I hope it will serve as a one stop place to go for information on writing here.