At O1ne Mortgage, we prioritize your financial security and education. Understanding the differences between credit card and debit card fraud is crucial for protecting your finances. In this article, we will explore how credit card and debit card fraud works, compare their safety, and provide tips on how to protect yourself from fraud.

How Credit Card Fraud Works

Credit card fraud occurs when someone uses your credit card account—either the card itself or your card number and personal data—to make unauthorized charges or open a new account. If unauthorized charges appear on your account, your liability depends on when you report the loss or theft to the credit card company.

Under the Fair Credit Billing Act, if you report the loss or theft before charges are made, you have zero liability. If you report after charges appear, your liability is capped at $50. Many credit card issuers offer zero liability protection, meaning you’re not liable for any charges, no matter when you report the loss or theft.

How Debit Card Fraud Works

Debit card fraud has harsher consequences for your finances because your own cash is at stake. The Electronic Fund Transfer Act governs a consumer’s liability as a result of debit card fraud. If you report the loss or theft of a debit card before unauthorized charges are made, you have zero liability. However, if you report after unauthorized charges are made, your liability depends on how soon you alert your bank:

• Within two days of fraud: $50 maximum liability
• Two to 60 days after fraud: $500 maximum liability
• More than 60 days after fraud: Liability for up to all unauthorized charges

Which Is Safer, a Credit Card or Debit Card?

Based on liability protection alone, credit cards are safer than debit cards. You’re not at risk of losing money immediately from your bank account, which you may be responsible for depending on when you report the loss or theft. However, there are circumstances when using a debit card can be just as safe and potentially more convenient or budget-friendly.

When to Use a Credit Card

• Purchase protection: Many credit cards offer purchase protection, which may help you get your money back if an item you bought is stolen, damaged, or not what you expected.
• Earning rewards: Credit card rewards come in the form of cash back, points, or miles, offering perks on everyday spending or travel.
• Making hotel deposits: Using a credit card for hotel deposits is more convenient as it prevents your bank account from being temporarily depleted.

When to Use a Debit Card

• Withdrawing cash: It’s more cost-effective to use a debit card at an ATM, avoiding cash advance fees and APRs associated with credit cards.
• Avoiding convenience fees: Some merchants charge a convenience fee for using a credit card. Using a debit card can help you avoid these fees.
• Limiting debt: Using a debit card ensures you never spend more than you earn, helping you avoid debt.

How to Protect Yourself from Credit and Debit Card Fraud

Take these steps to limit your exposure to credit and debit card fraud:

• Secure your physical cards: Keep your cards safe from theft by keeping them with you rather than in your car or gym locker. Using a digital wallet can also limit potential loss or theft.
• Use contactless payments: Contactless payments are more secure than using a card’s chip or magnetic stripe. Request an updated card from your financial institution if needed.
• Watch your accounts: Regularly monitor your bank and credit card accounts to ensure you recognize every purchase. Sign up for fraud alerts from your bank and credit card issuer.
• Make use of card locks: Lock your credit or debit card if you’ve misplaced it but expect to find it again. This prevents unauthorized transactions while allowing scheduled bill payments to go through.

The Bottom Line

Credit cards generally offer better fraud protection than debit cards, making them a safer choice. However, no matter which payment method you use, there are ways to protect yourself from fraud. Regularly checking your credit report is a crucial component in avoiding the stress and inconvenience of fraud.

For any mortgage service needs, contact O1ne Mortgage at 213-732-3074. Our team is here to help you with all your mortgage needs and ensure you have the best experience possible.