DEBIT CARDS AND INCREASED RISK OF FRAUD

At KnightsBridge Castle we often advise clients to not use debit cards for payments. In our opinion the legal protections against fraud provided by “credit cards” are significantly superior to those protections against fraud found in “debit cards.”

Credit card use and fraud is protected under federal fair credit laws which limit your exposure to $50 per fraudulent charge. Most credit card issuers (but not all) will wave this fee in the event of fraud. However debit cards have fewer protections and losses are generally limited to $50 if the bank is notified within business two days. Losses reported after two days are limited at $500. If the loss is reported following a 60 day delay, the bank is under no obligation to reimburse you. While some banks offer added protections for debit cards, consumers are often ill prepared to follow the complex provisions of these additional debit card protections. For example, the added protections against fraud provided by VISA and MasterCard require that the debit card be authorized by a signature rather than a PIN. In a recent Wall Street Journal article the author commented:” The reason: Banks get higher fees from merchants when consumers use debit cards with signatures, rather than PINs.”

Whatever the risk, consumer protections against fraudulent use of cards is best provided by credit cards regulated under the federal fair credit laws. At KnightsBridge Castle we do not advocate either debit or credit payments. However, in our opinion, and based on our experiences in assisting fraud victims, you are far far safer using credit cards. If you don’t like debt, then pay off the card fully when you receive the bill.