credit cards

According to many sources, debit card fraud is on the rise!

My debit card was recently hacked and I got a fraudulent charge of over $500 on it from Verizon Wireless. But, I was super-fortunate in two respects: I just happened to notice it days after it happened, and I have a bank that has a good policy with regard to fraud, and they were pretty cool about reimbursing my account while the investigation went on.

But, I was surprised by this fraud because I NEVER use my debit card to make purchases!  I use credit cards instead.  I only use my debit card to withdraw cash or make ATM deposits.  I have no idea how someone could have gotten my debit card number, other than from the bank itself!  Very disturbing!

In any case, I have discovered a way to completely ELIMINATE fraudulent purchases on my debit card from now on.

Disable Your Debit Card’s Ability to Make Purchases

Basically, you should completely disable your debit card’s ability to make purchases.  This works for me because I never use my debit card to make purchases (if you do, I’ll talk about why you should use a credit card instead in a moment).

The easiest way is to go online, log into your bank account, and look for a way to set your debit card purchase limit.  You might have to look around your bank’s website for a while to find it.  If your bank has this feature, simply set your debit card purchase limit to zero dollars.  Voila! Your debit card is now protected against future fraudulent purchases.

If your online banking website doesn’t have this feature, you can go to your bank branch and request a card that doesn’t have the ability to make purchases.

You can also set limits to the amount you can withdraw from ATMs using your debit card, but I actually use it to withdraw cash, so I didn’t zero that out.  However, if, say, you had a business debit card that you only use to deposit checks, you could zero that out too, making your debit card pretty much invulnerable to fraudulent purchases or ATM withdrawals (unless someone gets your online password and changes the limits).

Why Debit Card Fraud is Worse than Credit Card Fraud

The law provides less protection to you from fraudulent debit card purchases than it does from fraudulent credit card purchases.  For example, if you don’t inform your bank promptly about fraudulent debit card purchases, you could be liable for up to $500 of the cost of the fraudulent purchase.  Now, most banks are not that cruel and voluntarily keep the limit much lower, like $50 or zero dollars, but I’d rather have the legal protections that come with a credit card.

Second, funds are immediately deducted from your bank account when you, or anyone else, uses your debit card.  So, a fraudulent purchase could cause your bank account to dip below a minimum balance, resulting in fees, or even worse, cause you to bounce checks!  Not good!

More Reasons Credit Cards are Better

If you’re still not convinced to use credit cards instead of debit cards to make purchases, read on.

Aside from less liability from fraud, credit cards give rewards like airline miles, store credit, or whatever.  I have one that gives cash back.  Not much, but hey, you get it for doing nothing.

In addition, some cards offer free perks like extended warranties, price protection, and rental car insurance.  Why not take these free benefits?

So hopefully, I’ve convinced you to shut off your debit card’s purchasing ability and use credit cards instead.  As long as you pay them off each month and resist the temptation to use your credit cards for a high-interest loan, credit cards are better.  Lack of financial self-control would be the only reason to stick to debit cards.

Other Prudent Steps to Protect Your Card

Up to now, I’ve talked about preventing fraudulent purchases on your debit card.  However, there is still the possibility of someone making fraudulent cash withdrawals.  One scam involves setting up a bogus card reader and camera at ATMs, scanning your card and recording your security code as you type it.  So, beware of suspicious-looking card readers at ATMs.

Also, it’s always prudent to monitor your account activity frequently.  Yes, this is a pain.  I was totally lucky in my case, as I used to go for up to a month without looking at my bank statement.  I’ll be more vigilant about checking my account activity now.

Finally, switch from paper statements to electronic statements.  This is another slight inconvenience, as it’s nice to have a paper copy, but think of how easy it would be for someone to walk up to your mailbox (if you live in an apartment/condo, most mailboxes are locked, but they aren’t for most houses!) and steal your bank statement?

Follow these tips and use common sense (use good passwords, destroy old cards before disposing, shred paper statements before disposing, etc.), and your debit card will be a lot more secure!

Let me know your ideas! – Brian

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