According to credit specialists, more and more Americans with credit cards are switching to debit cards to avoid incurring debt and facing huge interest rates. The demand for debit cards have ballooned in recent months, fueled by the recession and costly charges and fees slapped on by card companies. Unlike traditional credit cards, debit cards require a bank account as security against overspending and unpaid balances.
While both cards are required to have the same level of protection against credit fraud, their different natures make them unique from each other. Conventional credit cards have credit limits that represent borrowed funds. This means that in an event of fraud, no actual money is lost. With debit cards, however, the cardholder can lose actual money deposited as security or collateral.
The cardholders themselves can also easily detect credit fraud reported on ordinary cards. Most card companies also allow consumers a considerable amount of time, usually between 25 and 55 days, before any unauthorized charges are considered real purchases. With debit cards, however, cardholders have to inform their card companies immediately upon suspecting a possible credit fraud incident.
In the past, card companies were often liable only for a maximum of $50 in the event of credit fraud. Major brands, however, introduced a zero percent liability policy for their clients, requiring card issuers to reimburse cardholders if they become victims of fraud. This had made debit cards almost at par with conventional credit cards when it comes to fraud protection.
One major difference between debit and credit fraud is the amount of money that can be stolen or misused by perpetrators. An ordinary card with high credit limits can mean a higher amount involved in fraud transactions. Without real cash stolen, however, cardholders can report fraud to card companies and have the incident investigated. Once proven that the consumer is not at fault, the cardholder's record with the banks and credit bureaus can be fixed. Debit card fraud, on the other hand, can mean actual loss of cash. Even so, most debit cards have relatively low credit limits. New policies can even help cardholders get reimbursed for proven unauthorized and fraudulent transactions.
Experts also suggest monitoring credit histories and records regularly to spot any suspicious entries that may indicate fraud. Failing to report fraud immediately can have adverse effects on credit records and ratings, leading to less-than-desired rates and terms.
Industry specialists say that consumers should stick with conventional credit cards if they seek less hassle and inconvenience when it comes to fraud.