No one wants to be defrauded. No one wants to have their identity stolen. No one wants to lose their hard-earned money. As a result, fraud protection is often one of the key concerns consumers have, and the question that comes up over and over again is: Does a credit card or a debit card protect my money better? Well, why don’t we find out once and for all?
The Perception of Fraud Protection with Debit and Credit Cards
People naturally assume that a debit card’s fraud security exceeds that of a credit card for a number of reasons. Many think that because a debit card only affects what’s in your checking account and doesn’t give users access to a line of credit, a thief could only do so much damage. Others consider debit cards to be the electronic version of checks, which themselves are considered far more secure than credit cards.
Much has also been made of issues within the credit card industry over the past couple years, and some people have grown to distrust credit cards. Besides, you hear an awful lot about credit card fraud on the news, so that must mean they aren’t too trustworthy, right?
The Fact of the Matter
Both credit cards and debit cards have $0 fraud liability, which means you won’t be held liable for unauthorized charges whether you’re using a credit card or a debit card, and there is technically no difference in the fraud protection they provide. Still, let’s consider an example to see if there are any practical differences in their protection.
The Practical Application
Imagine your debit card account number gets stolen right around the end of the month, and unbeknownst to you, your checking account gets wiped clean. When your mortgage statement arrives the next month you notice that you’re classified as delinquent and have been assessed a hefty late fee, so you quickly look through your check book and confirm that you did indeed send a payment on time.
What’s going on? Well, when you call your bank you’re told that the check bounced due to insufficient funds. Fraud has obviously taken place, and while the bank says you’ll be reimbursed for the unauthorized charges, you still have to sort things out with the mortgage company.
This is only one side of the coin, however, so let’s replace a debit card with a credit card in the same hypothetical situation.
Money isn’t automatically removed from your banks accounts when a credit card is used for payment. You typically have at least 21 days to pay for charges after receiving your monthly statement, meaning you have a buffer with which to deal with any fraud. Therefore, not only will you ultimately recover any money spent fraudulently, but the simple fact that you were defrauded won’t have a ripple effect that damages other aspects of your financial life, like your mortgage or your credit standing.
Thoughts on Fraud Protection for Credit and Debit Cards
Ultimately, there is really no difference between debit cards and credit cards in terms of the fraud protection they provide. Both spending vehicles have $0 fraud liability guarantees, meaning you’ll get your money back no matter which you’re using.
However, the simple fact that money is removed from a checking account immediately upon a debit card being used makes debit card fraud more difficult to deal with than credit card fraud. As a result, we have our answer. Credit cards provide better protection against fraud than do debit cards.
This article was written by Card Hub’s CEO, Odysseas Papadimitriou. Card Hub is a personal finance website that helps consumers find prepaid cards, gift cards and the best credit card deals.
Photo Credit: Andres Rueda