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You may think of debit and credit cards as nearly the same thing, with the exception of having money withdrawn from your account immediately (debit card) or receiving a bill for payment later (credit card). There are some key differences beyond this that you should consider the next time you decide on using a debit or credit card.
Although most debit card issuers treat disputes the same as in a credit card transaction, you have no dispute rights under federal law if you're not satisfied with a product or purchase. Experts advise that you use a credit card rather than a debit card for online, catalog or big-ticket purchases. Check the terms of your debit-card agreement to see what protections it offers.
On lost or stolen credit cards, your loss is limited to $50 per card. And if you notify the issuer before the thief makes any charges, you may not be out anything. You're also free from liability if unauthorized purchases occur when the card is not physically present, for example when used for an online purchase.
On lost debit cards, your liability for an unauthorized withdrawal can vary:
1) Your loss is limited to $50 if you notify the financial institution within two business days after learning of loss or theft of your card or code.
2) You could lose as much as $500 if you do not tell the card issuer within two business days after learning of loss or theft.
3) If you do not report an unauthorized transfer that appears on your statement within 60 days after the statement is mailed to you, you risk unlimited loss on transfers made after the 60-day period. That means you could lose all the money in your account plus your maximum overdraft line of credit, if any.
4) Federal protections are a bit more generous if a thief just steals your debit card number (and not the actual card), but you still have 60 days after receiving your bank statement to report any unauthorized transactions. If a thief steals your card and your PIN, the federal rules are your only defense.
Zero-liability policies, like those offered by Visa and MasterCard, add a second layer of protection. Under these programs you won't pay anything if someone fraudulently uses your credit card online or off. These policies also apply to debit cards, but only to non-PIN transactions.
For additional protection check your homeowners or renter's insurance policy. Most cover up to $500 for losses from unauthorized card use. And no matter which card is stolen, always follow up with a certified letter to your issuer -- return receipt requested.
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