Fraud Risk - Debit vs Credit Cards - TravelPUNK Backpacker College Student Budget Travel Message Boards!

**LiveFreeorDie** · 03-15-2007, 05:57 AM

I thought I would share some info regarding the U.S. laws as they pertain to fraudulent use of your debit card versus a credit card. There are some big differences in risk and it is important to be aware of them:

Credit cards are regulated by federal fair-credit laws, which generally limit consumer responsibility for losses to $50 for unauthorized use. Many card issuers waive even that. Moreover, fraudulent charges are the bank's and the retailer's headache, not yours.

But debit cards are regulated by the law that governs electronic fund transfers. While losses are limited to $50 for unauthorized use reported within two business days, any losses reported after two days are limited to $500. If you report a loss more than 60 days after the bank transmits a statement that includes an unauthorized funds transfer, the bank doesn't have to reimburse you. As a result, cardholders can be liable for losses up to the entire balance in the account and their maximum overdraft line of credit.

A growing number of banks are touting "zero liability" protections to promote debit-card use, but there can be exceptions. Card issuers Visa USA and MasterCard Inc. offer their "zero liability" guarantees only to consumers who use their cards with a signature instead of a PIN. That can be difficult at times because retailers often steer consumers to enter their PINs on keypads. The reason: Banks get higher fees from merchants when consumers use debit cards with signatures, rather than PINs. Some banks may choose to offer zero-liability protection to PIN users, too. J.P. Morgan Chase & Co.'s Chase bank, for instance, offers this protection to PIN-debit users if a fraud is reported within 60 days of receiving a bank statement.