Credit Card vs. Debit Card: Which Is Safer Online?

Overview

• Credit Card Fraud: The issuer's money is at risk, not the cardholder’s.
• Debit Card Fraud: The cardholder’s own money is at risk and can be directly affected.

Fraud Handling Differences

• Credit Card Protection

  • Governed by the Fair Credit Billing Act (FCBA).
  • Maximum liability for fraudulent credit card transactions is $50.
  • Zero liability if reported before any fraudulent transaction.
  • Many issuers offer zero liability for all fraudulent transactions.

• Debit Card Protection

  • Governed by the Electronic Funds Transfer Act (EFTA).
  • Liability depends on when the fraud is reported:
    • If reported before unauthorized transactions: zero liability.
    • If reported within two days: $50 liability.
    • If reported within 60 days: $500 liability.
    • After 60 days: no protection.
  • Reporting fraudulent transactions within 60 days ensures zero liability if only card number is stolen.

Impact of Fraud

• Credit Card Fraud

  • No immediate financial loss; cardholders can report fraud and receive credits.
  • Doesn’t affect bank account balances.
  • Easier to resolve without affecting day-to-day finances.

• Debit Card Fraud

  • Immediate impact on bank balances.
  • Can cause declining of legitimate charges or overdrafts.
  • Requires cardholder's action to recover lost funds.

Recommendations for Non-Credit Card Users

• Keep a low balance in accounts linked to debit cards used online to limit potential fraudulent withdrawals.
• Disable overdraft protection to prevent access to linked accounts in case of fraud.
• Consider using a prepaid debit card to limit potential losses to the amount loaded on the card.

Conclusion

• Credit cards offer more legal protection against online fraudulent activity compared to debit cards.
• Debit card users can mimic some credit card protections by managing their account settings and using prepaid cards.