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Even the most cautious debit card users could fall victim to a debit card scam. In 2020, a reported 25% of debit cardholders reported fraud. While you can take steps to prevent debit card hacks, it's also essential to understand how to identify, move quickly, and report fraudulent charges to ensure you’re not on the hook for the purchases.
What Is Debit Card Fraud?
Debit card fraud takes place when a third party gets your debit card number and/or your PIN number and makes purchases on your card. Since it’s a debit card, when the fraudster taps into your money, cash is deducted from your account, meaning you could overdraw or have insufficient funds without realizing it.This differs from credit card fraud because while someone can rack up charges on the card, the cash doesn’t automatically leave a credit card account.
How Does Debit Card Fraud Work?
Debit card fraud arises from several different situations where someone steals your card information without you realizing it:
Skimming involves a small device illegally attached to a credit card reader, which takes and stores your card information
Stealing a debit card or wallet with a debit card inside
Online shopping where there could be a scam at checkout
A hack or phishing scam where a third party gains access to your bank account online
Once the scammer has account information or the debit card, they can start making charges to the account.
Who Pays for Money Stolen From Debit Card Fraud?
The cardholder has less protection in a debit card scam than in a credit card hack. Under the Electronic Funds Transfer Act, debit card holders must report the fraud within 48 hours or be liable for charges up to $500. Even if the cardholder reports the fraud within the appropriate window, the bank or financial institution will have to open an investigation. That means the bank won’t restore the missing cash until resolving the case. For some debit cardholders, this could prove to be a challenge. Depending on the amount of cash missing, they may have to move money from a savings or emergency account to keep sufficient funds in their checking account.
Detecting Debit Card Fraud
Even a vigilant debit card user might fall prey to a debit card hack. That’s why keeping a close eye on the account is important, no matter what. Set up text messages or mobile app alerts with your bank to notify you of any purchases made on the debit card. If you detect fraud, you can report it quickly, then freeze or cancel the card to avoid future charges. Debit card fraud can happen to anyone. Reporting it in a timely fashion and reacting quickly can help you avoid footing the bill for fraudulent charges. Recommended: Bank Account Freeze, Explained
7 Tips to Avoid Debit Card Fraud
These habits can help you avoid a debit card hack. Consider the following tips when making purchases.
1. Avoiding Making Purchases With Your Debit Card
Unfortunately, debit cards don’t afford users the same purchase protection as credit cards. The Fair Credit Billing Act protects credit card holders in the case of fraud. They are only liable for up to $50 of fraudulent transactions, no matter when they report the hack.On the other hand, debit card holders could be responsible for up to $500 of the charges if they don’t report the issues in time. If you have a credit card and can pay it off in full and on time, consider using it for most purchases.
2. Destroying Old Debit Cards
Old debit cards and statements can contain valuable financial information. Cut up old cards with scissors and ensure the magnetic strip and chip are unusable. Consider shredding documents before throwing them away across different trash cans so someone can’t piece the statements back together.
3. Checking Card Readers for Skimmers
Skimming devices can be discreetly installed on ATMs, gas pumps, and other point-of-sale terminals. The device steals your account information when you swipe your debit card. The FBI estimates skimming costs cardholders and banks more than $1 billion in loss annually.Before inserting a debit card into an ATM or gas station reader, double-check to see if there’s an additional device over the reader. If the reader sticks out, it could be an attached skimmer. If you believe there’s a skimmer attached, consider using a different ATM or paying with the gas station attendant inside.Additionally, cover the keypad as you type in your debit card pin. Some criminals install a small pinhole camera above the pad to capture your PIN as you type it in. Recommended: A Guide to Cardless ATMs
4. Getting Alerts From Your Bank
Many banks and financial institutions now offer real-time alerts for debit card charges. Turning these notifications on can provide an additional safeguard and alert you to unusual spending.
5. Paperless Statements
Mailed bank statements often include sensitive information, including bank account numbers. Opt to go paperless, so no one can intercept this information in the mail.
6. Not Giving Out Your Debit Card Information
From online hacks to in-person skimmers, it may feel impossible to avoid debit card fraud. In some instances, it may just be a gut feeling. Avoid giving out debit card information unless necessary, and double-check retailers online for security before completing a transaction.If you suspect you may have given out your debit card information to a fraudulent site, contact your bank immediately, and freeze your debit card.
7. Securing Your Online Devices
Debit card scammers can obtain your debit card information through your online accounts. Consider changing your passwords to be more secure (including letters, numbers, and special characters) and adding two-factor authentication to accounts where possible. Two-factor authentication means a bank will send you a text message or email with a one-time use code when you sign in to a new device to confirm it’s you. These simple actions can help keep criminals out of your online accounts where they can get your account information.
What Can You Do If You Are Scammed?
If you suspect you’ve been a victim of a debit card hack, reach out to your bank or financial institution as soon as possible to file a claim. From there, your bank will open an investigation into the fraud.The timing of when you filed the claim can impact your responsibility. If you file a claim:
Within 48 hours (2 business days), you’ll only be on the hook for up to $50 in account charges.
After 2 days, but before 60 days, you may be responsible for up to $500 in fraud charges on your account
After 60 days, the bank is not obligated to refund any of the charges after that period. You’ll also be responsible for up to $500 in transactions made within that initial 60-day window.
If the fraudulent charges lead to overdrafts or insufficient fund fees, you can contact your bank and ask to have the charges waived. If the charges have significantly impacted your checking account balance, consider transferring money from an emergency fund, rainy day fund, or savings account to cover the loss until you resolve the charges. Once the fraud is reported, the bank typically has to respond to the incident within 10 days. If the bank takes longer than 45 days, you can file a complaint with the Consumer Financial Protection Bureau.
Debit Card vs Credit Card Fraud
Credit and debit card fraud may appear similar, but the protections and processes are different for credit card scams.Generally, a credit card provides more protection in the case of fraud. For example, since the purchases aren’t directly debited from a checking account, the cardholder has a buffer between purchasing and paying for it.The main difference between debit and credit card fraud are:
Debit Cards
Credit Cards
Fraud is protected under:
Electronic Funds Transfer Act
Fair Credit Billing Act
Maximum liability:
$500
$50
Buffer between purchase and losing money
No
Yes
If you can use a credit card wisely–meaning paying down the balance in full and on time–it may be preferable to make purchases with it. Reporting fraud is simpler, and the cardholder’s maximum liability for fraudulent purchases is lower than with a debit card. Additionally, the cardholder doesn’t immediately lose that balance from their checking account, giving them some padding when resolving the charges. And there are credit card security codes.Recommended: What Do Credit Card Numbers Mean?
The Takeaway
Debit card fraud can happen to anyone, both online and in-person. That’s why it’s important to regularly check account charges or set up alerts with your financial institution. The second you suspect someone has hacked your debit card, reach out to the bank; taking too long can increase your maximum liability. Because debit cards have fewer protections than credit cards, it can be wise to avoid making purchases with them, as long as you spend responsibly. Lantern’s savings account tool helps you compare fees and rates from top banks and sign up in one place. Learn more at Lantern by SoFi.
Frequently Asked Questions
Can debit cards be hacked?
Who is responsible for debit card fraud?
Do banks refund debit card scam money?
Photo credit: iStock/Drs Producoes
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About the Author
Emma Diehl
Emma Diehl is a nationally-published journalist with expertise in finance, real estate, and technology. Her work has appeared on NPR, The Huffington Post, Technical.ly, and numerous local publications. When she's not covering the world of personal finance with SoFi, she's probably rollerblading or planning her next meal.
