Debit vs. Credit: Which Should You Use To Be Better Protected Against Identity Theft and Hackers?

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Were you one of the many Target shoppers whose credit or debit cards got hacked?

I was. And so were 110 million others. The hackers stole customer data, including customer names, credit and debit numbers, card expiration dates, and the three-digit security codes from shoppers who visited Target from November 27- December 15, 2013. Our information was compromised during the peak of the holiday season. Many banks cancelled all cards that could potentially have been affected during the hack, leaving me (and many other shoppers) cardless and annoyed, with potential unauthorized transactions on our accounts.

So it got me thinking. Hacking and identity theft are very real problems in today’s day and age. You should do your best to prevent it, but in some cases, it’s going to happen. The Target hacking was unavoidable for shoppers. There was no way of knowing that there would be a security breach at Target. But there are some who left the hacking better off than others: credit card users.

Credit card and debit cards are used interchangeably today. Consumers like using debit cards, because these cards take the money directly out of your checking or savings account. This makes it easier to monitor spending habits. There are no minimum charges, interest fees, and they are accepted in most places. On the other hand, credit cards are based on credit. You must be able to use credit responsibly, and they can have annual fees and interest charges. As a result, thousands of consumers use debit instead of credit. While the simplicity of debit cards is great, credit cards are much safer to use. Especially in the case of a major hacking like Target’s.

Debit cards are not as well protected by consumer protection laws. Under federal law, credit cards have extensive fraud protection. As long as you report your fraudulent charges within a certain period, you will not be responsible for unauthorized charges on your account. Your personal liability cannot exceed $50, and you will receive full protection and security under the law. Many major credit card companies, including Visa and MasterCard, have issued a zero liability policy for credit card users. If you are hacked, they will issue immediate refunds for all unauthorized transactions. So, even though the hacking may have been an inconvenience, those that used credit cards at Target can expect to get their money back. Additionally, credit card users will have 25-55 days before they are responsible for paying back the money. This gives users ample time to report and resolve the fraudulent charges.

However, with debit cards, there are not the same federal protections in place. If there are unauthorized charges on your debit card, you could be liable for $500 or more, depending on how quickly you report it. In addition, since a debit card provides direct access to your account, getting hacked could mean that someone can easily drain your checking or savings account immediately. It can be a hard and lengthy process for the bank to investigate the fraud and reimburse your account. And during this time, you may not have the money to pay rent, buy groceries, etc.  As a result, debit cards can be much riskier, since they have the ability to wipe out your account quickly. While this money may be replaced, it may take time. With a large hacking like Target, debit cards put you at risk without the federal protections you need.

Overall, credit cards are a better option than debit if you are looking for purchase and fraud protection. But as always, you should be aware of identity theft. Be vigilant, and check your accounts and your credit report.
By reviewing your bank statements each month, you should be able to note and report any suspicious activity. Although the Target hacking was relatively unavoidable, you can take preventative measures to stop obvious forms of fraud. Be aware of your surroundings, and keep your personal information to yourself. By keeping your accounts private and using protected credit cards, you don’t have to fall victim to identity theft and fraud.

Written on 2/10/2014 by Alice Bryant. Alice Bryant, a personal finance and credit card expert who contributes regularly to Creditnet. Creditnet is an authority credit card comparison site that offers innovative comparison tools to help users find the best credit card for their needs. In addition, the Creditnet Credit Talk Forum is a community of over 100,000 members that discuss credit cards, credit, debt, and credit repair daily.

Photo Credit: B Rosen

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