Although you may be able to use credit cards and debit cards in similar situations, the amount of liability you have when it comes to fraudulent use of either differs. No matter how you pay, the Federal Government has established limits as to the amount of liability you have when fradulent use of your card occurs.
Credit Card Liability Limits
In cases of fraudulent use of a lost or stolen credit card, the Fair Credit Billing Act limits your liability to $50.00. However, if you report the loss of your card before any fraudulent use occurs, you are not liable for any unauthorized charges.
Debit Card Liability Limits
Your liability maximums for fraudulent use of a debit card after theft or loss depend on how quickly you report the loss or theft.
|Days to Report||Maximum Liability Limits|
|Reporting loss or theft before fraudulent charges occur||$0|
|Reporting loss or theft within two business days of you recognizing the theft or loss||$50|
|Reporting loss or theft between three days of learning about the theft or loss and 60 calendar days or less after receiving the statement containing fraudulent charges||$500|
|Reporting loss or theft more than 60 calendar days after receiving the statement containing fraudulent charge||All money taken, including amounts taken from affiliated accounts|
The Impact of Liability Limits
Your liability for fraudulent use of one of your credit cards is much less than that of fraudulent use of a debit card. When choosing whether to use your debit or credit card, you might consider:
- Where you are using the card: Using a debit card at a store that has experienced card theft in the past, and which has not taken steps to further protect consumers, may increase the odds of theft or loss.
- Whether you are traveling: Because there are no time limits to your reporting loss or theft of your credit card, you will not incur as much liability for fraudulent use of a card if you do not realize your card is missing while traveling and only report the loss when you return home. This may make it sensible to use a credit card when traveling.
- Whether you do not regularly use your debit card: Not pulling your debit card out of your wallet often means that there's more opportunity for lengthy time periods to lapse before you realize it is missing. This could mean increased financial losses for you.
- Whether you do not regularly check your bank statements: Not checking bank statements means that you might be unaware of fraudulent activity. The longer it takes for you to notice fraudulent activity on your debit card account, the higher your liability.
- Whether you have several accounts linked to your debit card: Your liability for losses after 60 days of losing a debit card include all money taken from money in accounts associated with your debit account. This could mean that you lose more than what is just in your debit account.
Increased Fraudulent Use Protection
Some credit and debit card companies offer increased liability protection above and beyond what federal law requires. These cards include, but are not limited to:
- Discover Card: This card offers $0 liability to its customers for any fraudulent use. There is no charge for this benefit.
- MasterCard: For personal credit cardholders, this credit company offers $0 liability for fraudulent use. There is no fee for this service. Liability does not extend to MasterCard debit cards. However, benefits only extend when:
- The cardholder has not reported two or more unauthorized uses in the preceding 12 months.
- The cardholder exercised reasonable care in protecting their card from fraudulent use.
- The cardholder's account is in good standing.
- Visa: This credit company also offers $0 liability to cardholders whose credit or debit cards are used fraudulently. Additionally, the company requires all financial institutions to extend provisional credit after unauthorized use within five business days of being notified of the fraud.
- Bank of America: This bank offers zero liability to credit and debit cardholders whose cards are used fraudulently. However, fraudulent use of a debit card must be reported within 60 days of issuance of the debit card statement to receive protection.
- Chase Bank Debit Cards: Cardholders of a Chase debit card have zero liability for fraudulent use if the fraud is reported promptly. The company does not establish a specific number of days that it considers prompt. Fraudulently spent funds are returned to the consumer by the conclusion of the following business day.
Reducing Your Fraud Liability
To reduce the amount of liability that will befall your shoulders after fraudulent use of your debit or credit card, inquire into the limits that apply to your specific card or use a card that has zero liability. Additionally, check your statements regularly to report fraud as quickly as possible.